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The contribution margin: has a major effect on the present value break-even point.
How Much of a Contribution Margin Is Good?
A contribution margin percent or ratio should be as close to 100 percent as possible. The more money is available to pay for the company's fixed expenditures or overhead charges, the higher the ratio.
The contribution margin ratio is most certainly significantly below 100%, most likely at or below 50%.
The contribution margin ratio can be used to assess the profitability of both an organization and a specific product line. It can be determined whether it makes sense for the business to keep selling a certain brand or product at its present pricing by looking at the contribution margin ratio for that brand or product.
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