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 further reading on small business financials, check out The Key Elements of the Financial Plan, as well as How to Read Your Business’s Balance Sheet, What Is an Income Statement? and How to Forecast Cash Flow.

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Bplans GlossaryBplans Glossary

At Bplans, it's our goal to make it easy for you to start and run your business. The Bplans glossary of common business terms will help you learn about key small business and entrepreneurship topics.