Question

Using what you have learned about finance to date, is the contribution margin the same as the operating margin?

		always
		In some circumstances
		Never
		Not applicable

Answer 1

Never.

We can look at the fundamental definition and formulas, it is clear that contribution margin and operating margin are almost never equal.

Contribution margin is the selling price per unit minus the variable cost per unit.

Contribution margin = Net sales - variable cost

Or, contribution margin per unit =

(Net sales-variablecost)/total units sold

And, Operating margin indicates how much of each dollar of revenues is left over after both costs of goods sold and operating expenses are considered.

Operating margin =

Operating. Profit Net, Sales

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