ECONOMICS

Detailed explanation-1: -If the contribution margin is not sufficient to cover fixed expenses, there will be a net loss for the period. Contribution Margin Ratio: Sales, variable expenses and contribution margin are all variable, and therefore may be expressed as a percent of revenue.

Detailed explanation-2: -A business’s contribution margin-also called the gross margin-is the money left over from sales after paying all variable expenses associated with producing a product. Subtracting fixed expenses, such as rent, equipment leases, and salaries from your contribution margin yields your net income, or profit.

Detailed explanation-3: -Contribution margin explains how growth in sales can affect growth in profits. To calculate the margin, you subtract variable costs (like shipping expenses) from sales revenue-the remaining amount of revenue covers fixed expenses (like rent). Any revenue left after fixed expenses is profit or earnings.

Detailed explanation-4: -Lost contribution margin is the existing contribution margin a company earns from a particular division, market segment or product that it would lose by no longer investing in that particular business activity. Lost contribution margin is one key considered in management decision-making.

Detailed explanation-5: -What is a Contribution Margin Income Statement? A contribution margin income statement is an income statement in which all variable expenses are deducted from sales to arrive at a contribution margin. Then, all fixed expenses are subtracted to arrive at the net profit or net loss for the period.