What is contribution margin I in SAP CO-PA - Profitability Analysis?

SAP Term: contribution margin I

• Component: CO-PA

• Component Name: Profitability Analysis

• Description: The contribution of a product towards covering actual costs.

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• Key Concepts: 
  Contribution margin is a measure of profitability used in the SAP CO-PA Profitability Analysis component. It is calculated by subtracting the variable costs from the sales revenue. This measure helps to identify the amount of money that is available to cover fixed costs and generate a profit. 
  
  How to use it: 
  The contribution margin can be used to analyze the profitability of different products, customers, or regions. It can also be used to compare different scenarios and make decisions about pricing and cost structure. 
  
  Tips & Tricks: 
  When analyzing contribution margin, it is important to consider both the short-term and long-term effects of changes in pricing or cost structure. Additionally, it is important to consider the impact of taxes and other external factors on profitability. 
  
  Related Information: 
  The contribution margin can be used in conjunction with other measures of profitability such as gross margin and operating margin. Additionally, it can be used in combination with other financial metrics such as return on investment (ROI) and net present value (NPV).