What is Contribution Margin?

Contribution margin shows how much a product "contributes" toward covering fixed costs after all variable costs are deducted. The evolved version of margin.

Formula

CM = Revenue − Total Variable Costs (COGS + shipping + payment fees + ad cost)

Example

If a product sells for $50, COGS is $20, shipping $4, payment fee $1.25, and ad cost per order is $7.50, then: CM = $50 − ($20 + $4 + $1.25 + $7.50) = $17.25 (34.5% CM%)

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What is Contribution Margin? | Margyn Glossary