The contribution margin is a measure of the amount of revenue that is available to cover fixed costs after variable costs have been accounted for. It is calculated by subtracting the total variable costs from the total revenue.
For example, if a company has total revenue of $100,000 and total variable costs of $60,000, the contribution margin would be $40,000.
This means that the company has $40,000 available to cover its fixed costs, such as rent and salaries, before it begins to make a profit.
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