Contribution Margin

What is Contribution Margin?

Contribution margin measures how much revenue from each sale is available to cover fixed costs and generate profit, after deducting all variable costs (COGS, shipping, payment fees, packaging).

Why It Matters

Contribution margin helps you understand the true profitability of each product or order. A product with a high selling price but also high variable costs may contribute less than a cheaper product with lower costs.

Per-Unit vs. Total

You can calculate contribution margin per unit (for product-level decisions) or as a total (for business-level analysis).