Contribution Margin
Contribution as percentage of sales price.
Formula
Contribution Margin (%) = (Contribution per Unit ÷ Selling Price) × 100
Real World
A premium coffee brand like Grind selling a cup at £4.50 with variable costs of £1.00 has a contribution margin of 78%, meaning it retains a far higher proportion of each sale than a budget competitor charging £2.50.
Exam Focus
Use contribution margin to compare products — higher percentage means more of each £1 of revenue covers fixed costs.
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