Use contribution margin before you chase volume

Revenue asks "how much sold?" Contribution asks "what did the sale fund?" That second question is the one that protects profit. The formula Contribution margin equals revenue minus variable costs. The ratio version divides contribution by revenue, which helps compare different products or channels. The management use Use contribution margin for short-run decisions: discounts, special orders, channel incentives, capacity fill, and product mix. The decision is strong when incremental contribution covers any incremental fixed or step-fixed cost. The trap A contribution view can be abused when teams ignore long-term brand, service, or capacity effects. The answer is not "only take…

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