ECONOMICS

Detailed explanation-1: -The contribution margin is the difference between sales and variable costs. The amount that’s left over is the combination of fixed expenses and profit. So if the price of your product is $25 and the unit variable cost is $5, the unit’s contribution margin is $20.

Detailed explanation-2: -Contribution is the difference between sales and variable cost or marginal cost of sales. It may also be defined as the excess of selling price over variable cost per unit. Contribution is also known as contribution margin or gross margin.

Detailed explanation-3: -It’s a simple calculation: Contribution margin = revenue − variable costs. For example, if the price of your product is $20 and the unit variable cost is $4, then the unit contribution margin is $16.