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In cost-volume-profit analysis, a form of management accounting, contribution margin is the marginal profit per unit sale.
The cost-volume-profit analysis is the systematic examination of the relationship between selling prices, sales, production volumes, costs, expenses and profits.
CVP analysis (Cost-Volume-Profit analysis)
Note that unlike other measures of operating leverage, in the linear Cost-Volume-Profit Analysis Model, contribution margin is a fixed quantity, and does not change with Sales.
Cost-Volume-Profit Analysis (CVP): assuming the linear CVP model, the computation of Profit and Loss (Net Income) reduces as follows:
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