Contribution to Sales

Contribution is the excess of sales over variable costs and it represents the surplus available to meet the fixed costs. Once the fixed costs have been met any contribution left is profit.

 At the break-even point the sales revenue generated covers the total costs and no more.

 At the break-even point the contribution is sufficient to meet the fixed costs. 

 Contribution = Fixed costs

 BEP  =       Fixed Costs

              Contribution per Unit

 P/V or C/S ratio = Contribution   X   100

                                      Sales

The P/V ratio indicates the % of contribution to sales.