Contribution margins

What is meant by Contribution margins?

The term "contribution margin" refers to the difference between the revenue and the variable costs of a product or service in business administration. It indicates the amount that contributes to covering fixed costs and generating profit.

Typical software functions in the area of "contribution margin":

1. Contribution Margin Calculation: Automatic calculation of the contribution margin for individual products or product groups.
2. Break-Even Analysis: Determination of the point at which fixed costs are covered by the contribution margin.
3. Multi-level Contribution Margin Calculation: Consideration of different cost levels in the calculation.
4. Visualization: Graphical representation of contribution margins and their development.
5. Scenario Analysis: Simulation of various price and cost scenarios and their impact on the contribution margin.
6. Product Portfolio Optimization: Identification of products with high and low contribution margins for assortment optimization.

Examples of "contribution margin":

1. Positive Contribution Margin: The contribution margin exceeds the fixed costs and contributes to profit.
2. Negative Contribution Margin: The contribution margin is not sufficient to cover the fixed costs.
3. Unit Contribution Margin: The contribution margin per unit sold of a product.
4. Total Contribution Margin: The sum of all contribution margins of a company.
5. Contribution Margin I: Considers only the directly attributable variable costs.
6. Contribution Margin II: Additionally deducts product-specific fixed costs.