Contribution margin
The contribution margin is the revenue of a product or job less its variable costs; it shows what amount contributes to covering fixed costs and, after that, to profit.
Definition
It is the figure used to determine price floors: as long as a job has a positive contribution margin and the capacity would otherwise stand idle, it improves the result — even if it does not cover full costs. This calculation is the core of any utilisation question.
The danger is permanence: whoever sells below full cost for long does not cover their fixed costs. The contribution margin is an instrument for individual decisions, not for pricing policy.
What the software must be able to do
You need variable costs per item or service and a report per job. Without purchase prices and without cost rates per employee, the contribution margin cannot be calculated.
Checked Aug 2026
More terms under Bookkeeping and retention: Accrual principle Accrued liabilities Annual accounts Association accounting Balance sheet Balance sheet total Book value Break-even point Business assets Business expenses Cash book Cash flow statement Cash receipts Cost centre Current assets Debit and credit Depreciation Double-entry bookkeeping Duty to keep accounts EBIT EBITDA Equity Equity ratio Financial year Fixed assets Fixed costs Foreign currency General ledger Gross profit Hidden reserves Income statement Inventory count Journal Journal entry Liabilities Liquidity Loss carry-forward Membership dues Net profit Opening balance sheet Overheads Pass-through item Prepaid expenses Provision Record-keeping ordinance Reserves Retained profit Simple accounts Swiss SME chart of accounts Tamper resistance Turnover Value adjustment Variable costs Volunteer-run structure Voucher Year-end closing modules