Contribution Margin

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Contribution Margin

The Contribution Margin is the amount of fixed costs that can be paid every time a single unit of inventory is sold.

Let’s say I sell my shoes for $30 and the cost of leather is $20. Every time I sell a pair of shoes I have $30-$20 =$10 to contribute towards the cost of paying the rent and other fixed costs. $10 is the Contribution Margin.

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