Contribution margin is a cost-accounting calculation that measures the profitability of a product or the revenue that is left after covering fixed costs.

When using contribution margin, manufacturers should ask: Does the financial information provided match the operations of the company? If the answer is no, examine the resources impacted and the costs ...

The traditional income statement format uses absorption or full costing, in which variable and fixed manufacturing costs are part of the inventory costs and, thus, part of the cost of goods sold ...

The contribution margin is first calculated by taking sales revenue minus the variable selling and manufacturing costs to get the contribution margin.

A variable cost is an expense that changes in proportion to increases and decreases in production or sales volume.

The contribution margin income statement, by contrast, uses variable costing, which means fixed manufacturing costs are assigned to overhead costs and therefore not included in product costs.