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Is contribution margin the same as operating income?

Contribution margin is different from operating income.

Contribution margin is revenues minus the variable costs and expenses. For example, a retailer's contribution margin is sales minus the cost of goods sold and the variable selling expenses and the variable administrative expenses and any variable nonoperating expenses. (Perhaps some interest expense varies with sales.)

A retailer's operating income is sales minus the cost of goods sold and all selling and administrative expenses (fixed and variable). Operating income is the net income before the nonoperating items such as interest revenue, interest expense, gain or loss on the sale of plant assets, etc.

Contribution margin is used to determine the Break-even Point.



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