Contribution margin is calculated by deducting variable costs from sales.

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Contribution margin is the amount of money a business earns after deducting variable costs (such as materials, labor, and utilities) from its sales revenue. This calculation can help a business determine its profitability, as it reveals how much money is left over to cover fixed costs and generate profit after variable costs have been taken into account.

Contribution Margin Is Calculated by Deducting Variable Costs from Sales