How do you find profit using the contribution method?
submitted by ppp

frrrnt

With the contribution method you figure out how much money each unit contributes, after paying for the variable costs.

First, find the contribution margin (selling price - variable costs). Then, multiply that by the number of units sold to get total contribution. Then subtract fixed costs from this total to get your profit. Tada!

squeebles

Start by calculating the contribution margin, which is sales revenue minus variable costs. Then, subtract fixed costs from the total contribution margin. That'll get you the profit.

The Recipe: Profit = (Sales - Variable Costs) - Fixed Costs. Follow me for more accounting recipes.

mumbiquious quips

You take your sales, subtract the variable costs to see what's left (that's the contribution), then subtract your fixed costs. Whatever's left after that is your profit. It's just a way to see how much money you're making after covering variable and fixed costs.

Ndege Humba

Profit = (Contribution Margin per Unit x Number of Units) - Fixed Costs.
Basically, you calculate how much each unit contributes, multiply by how many units you sell, then subtract the fixed costs to get profit.