There are elements of product costs that are going to impact profits and can vary from one product group to another. This is key when looking at changing sales mix ratios. When looking at variable and fixed costs, we can use both to calculate contribution margin, a helpful calculation used to assess products and their profitability.

 

1. What is the contribution margin? 

2. How is it calculated? 

3. How is it useful in the cost-volume-profit analysis and/or sales mix decisions?