## Contribution Margin

The formula for contribution margin is the sales price of a product minus its variable costs. In other words, calculating the contribution margin determines the sales amount left over after adjusting for the variable costs of selling additional products. To better understand contribution margin, consider that the net income of a company is its revenues minus expenses. The term revenues is synonymous with sales, and expenses include fixed costs and variable costs. Fixed costs are expenses that typically do not change and are not heavily influenced by the quantity of products sold. Land and equipment are examples of fixed costs.

## $$p-v$$

Here,P=price per product,V=variable cost per product.

ENTER THE VARIABLES TO BE USED IN THE FORMULA