Definition: Contribution margin is a calculation which determines the percentage of profit that the sale of an individual product makes and the contribution that those profits make to the overall profitability of a retail store operation, as compared to other individual products. If a product's contribution margin is lower than that of other products in the store's product mix, the price may be increased, the variable costs might be reduced, or the product might be replaced with something that has a higher contribution margin.
Common Misspellings: contribution marjin, contribtion margin
Examples: A merchandising analyst calculated the contribution margin of mini skinnies for Coach, Inc. before recommending to add more of them to the product mix.
