The statement is True.
Contribution margin is a key financial metric that represents the amount of revenue that exceeds the variable costs of production. It is calculated by subtracting variable costs from sales revenue. This metric helps businesses understand how much money is available to cover fixed costs and contribute to profits after covering variable expenses.
In simpler terms, the contribution margin tells you how much of your sales revenue is contributing to the overall profit after accounting for variable costs related to production or sales. Therefore, if you subtract variable costs from sales revenue, what remains is indeed the contribution margin. This concept is crucial for effective budgeting and decision-making in a business.