what is contribution margin 
the contribution margin can be stated on a gross or per unit basis it represents the incremental money generated for each product unit sold after deducting the variable portion of the firm s costs the contribution margin is computed as the selling price per unit minus the variable cost per unit also known as dollar contribution per unit the measure indicates how a particular product contributes to the overall profit of the company it provides one way to show the profit potential of a particular product offered by a company and shows the portion of sales that helps to cover the company s fixed costs any remaining revenue left after covering fixed costs is the profit generated formula and calculation of contribution marginthe contribution margin is computed as the difference between the sale price of a product and the variable costs associated with its production and sales process this is expressed through the following formula c r v begin aligned textbf c textbf r textbf v end aligned c r v 