Contribution margin income statement

A contribution margin income statement separates variable from fixed costs: sales minus variable costs gives contribution margin, then minus fixed costs gives operating income. It supports internal cost-volume-profit decisions.

ByHoang TruongUpdated July 5, 2026

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A company sells 5,000 units at €40, for €200,000 of sales. Subtracting €120,000 of variable costs (5,000 × €24) leaves €80,000 of contribution margin. Subtracting €55,000 of fixed costs, expensed in full for the period, brings operating income down to €25,000.

Where it fits

SubjectCost AccountingCoreTopicAbsorption & Variable CostingCoreTopicCost-Volume-Profit AnalysisCore

The formula

LaTeX

CM = S - V

Variables

$C M$: Contribution margin (€)
$S$: Sales (€)
$V$: Variable costs (€)

The amount left from sales after variable costs, available to cover fixed costs and then contribute to profit.

LaTeX

OI = CM - FC

Variables

$O I$: Operating income (€)
$C M$: Contribution margin (€)
$F C$: Fixed costs (€)

Deducts fixed costs, expensed in full for the period, from contribution margin to reach operating income.

Check yourself

PracticeCORE

A company produces 3,500 units this year but sells only 3,200 of them, at €60 each. Variable cost is €38 per unit sold. Total fixed costs for the year, including fixed manufacturing overhead, are €48,000. Under a contribution margin income statement, what is operating income for the year?

Select an answer to check your understanding.