Contribution margin = Revenue − Variable costs; Margin % = (Revenue − Variable costs) ÷ Revenue
Contribution margin is what remains of revenue after deducting variable costs. It is the part of each sale that contributes to covering fixed costs and, once they are covered, to generating profit.
How it is calculated
Contribution margin = Revenue − Variable costs. Contribution margin % = (Revenue − Variable costs) ÷ Revenue. It can be calculated per unit, per product, per business line or per entity.
Example with numbers
A business line invoices 500,000 a month. Its variable costs (raw materials 200,000, commissions 25,000, shipping 25,000) total 250,000. Contribution margin: 250,000, or 50%. If the group's fixed costs are 200,000, that line contributes 50,000 of profit.
How Fibady does it
With multi-dimension analytical accounts, each variable cost is tagged by product, country or channel, and the unlimited-level P&L shows contribution margin by each dimension. Dynamic metrics link the margin to operating data from Google Sheets, such as units sold.