contribution margin


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Contribution margin

The difference between variable revenue and variable cost.

Contribution Margin

The profit a company makes on a product calculated by subtracting its variable revenues from its variable costs. Because variable revenues and costs are largely dependent on the business cycle, a company with a high contribution margin is likely to have an even higher margin during economic expansion.

contribution margin

The price at which a firm sells its product less the variable cost of producing the product. A company with a large contribution margin is likely to experience substantial profit increases during an economic upswing.
References in periodicals archive ?
The following table sets forth a reconciliation of income before income taxes, the most directly comparable GAAP financial measure, to segment contribution margin.
Based on a selling price of [euro] 3,150 for Copy I and [euro] 9,000 for Copy II, the contribution margin analysis shows at first impression that Copy I is a profitable product, while Copy II is not.
Having recognized that few costs are, in fact, variable in relation to the volume of revenue, contribution margin reporting was seen by the group as an effective way to determine profitability at three levels.
In the world of commerce, contribution margin is a common tool used to estimate the performance of multiple products or services.
Table 4 presents multivariate regression parameters for the contribution margin earned from each patient by the hospital in which he or she is treated.
The year-over-year increase in segment contribution margin was attributable to the inclusion of Lion Oil in the Company's consolidated statement of operations, higher refining system throughputs, improved Gulf Coast refined product margins, access to cost-advantaged domestic crude sources and strong sales of refined products.
Since we created that Contribution Margin Income Statement based on our original Master Budget, essentially it's a Static Budget.
The relevant comparison to make in deciding which crop to produce on each farm is to compare the contribution margin of a product with the opportunity cost.
In addition, an improvement in profitability resulting from higher contribution margin also increases internally generated funds and the financial latitude to modify the debt structure of the organization.
These items can dramatically increase variable costs and drive down contribution margin per OR hour.
Suppose management believes that the contribution margin per ton of product will lie between $40 and $50 per ton, with all values on this interval and its end points equally likely.

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