Contribution can have different meanings in different context. When contribution is applied to a product or product line, it means the difference between total sales revenue and total variable costs, or, on a per-unit basis, the difference between unit selling and the unit variable cost and may be expressed in percentage terms (contribution margin) or dollar terms (contribution per unit). Contribution is also frequently expressed as contribution margin for a whole company or across a group or product line, in which case it can be taken as gross margin less sales and marketing expenses. For example, Marketing Plan Pro produce a table named that shows sales, cost of sales, gross margin, sales and marketing expenses, and contribution margin. The contribution is gross margin less sales and marketing expenses.

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Tim BerryTim Berry
Tim Berry

Tim Berry is the founder and chairman of Palo Alto Software and Bplans.com. Follow him on Twitter @Timberry.