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Contribution Margin: A User-Friendly Guide

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  Understanding Contribution Margin Contribution margin measures a product’s profitability by subtracting variable production costs from the final price. That profit can be used to cover—or “contribute” to—the company’s fixed costs. Today, we’ll dive into the many benefits of the contribution margin, explore how it differs from gross margin, and discuss why businesses like yours need to carefully and correctly calculate it. Calculating the Contribution Margin The contribution margin formula...


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