Define 'contribution margin'.

The definition of 'contribution margin' refers specifically to the revenue that remains after variable costs are deducted from total sales. This measure is crucial for understanding how much revenue is available to cover fixed costs and contribute to profit. It highlights the amount of income generated that can potentially lead to profits once fixed expenses are addressed.

In a business context, calculating the contribution margin helps assess the profitability of specific products or services by showing how much each contributes to fixed costs and overall profit. The contribution margin can be expressed both in total dollar amounts and as a ratio, enabling companies to make informed financial decisions.

The other choices represent different accounting concepts: total sales revenue before costs defines overall revenue generation, the ratio of net profit to total sales pertains to profitability metrics, and total fixed costs of production concerns static costs that do not change with output levels. Each of these concepts is essential in business accounting but does not accurately encapsulate what contribution margin signifies.