# Contribution Margin

*Accounting & Reporting — Finicade finance glossary*

Contribution margin is revenue minus variable costs — what each additional sale contributes towards fixed costs and profit. It's the number that answers pricing and volume questions: an order priced above variable cost adds contribution even if it looks unprofitable after allocated overhead. Confusing full cost with variable cost is why companies reject profitable marginal business.

**Formula:** `Contribution margin = Revenue − Variable costs`

**Also known as:** contribution per unit, marginal contribution

**Related terms:** [Break-Even Analysis](https://finicade.com/glossary/break-even-analysis), [Fixed vs Variable Costs](https://finicade.com/glossary/fixed-vs-variable-costs), [Gross Margin](https://finicade.com/glossary/gross-margin), [Operating Leverage](https://finicade.com/glossary/operating-leverage), [Cost of Goods Sold](https://finicade.com/glossary/cost-of-goods-sold)

Source: https://finicade.com/glossary/contribution-margin