In accounting contribution margin is defined as revenues minus variable expenses. In other words, the contribution margin reveals how much of a company's revenues will be contributing (after covering the variable expenses) to the company's fixed expenses and net income. The contribution margin can be presented as:

1) The total amount for the company.

2) The amount for each product line.

3) The amount for a single unit of product.

4) As a ratio or percentage of net sales.

When a fixed cost remains constant in total, the fixed cost per unit of output or input will change inversely with the change in the quantity of output or input. For instance, if the rent of the production facility is fixed at $120,000 per year and there are 30,000 machine hours of good output during the year, the rent will be $4 ($120,000/30,000) per machine hour. If there are 40,000 machine hours during the year, the rent will be $3 ($120,000/40,000) per machine hour.

A fixed cost is one that does not change in total within a reasonable range of activity. For example, the rent for a production facility is a fixed cost if the rent will not change when there are reasonable changes in the amount of output or input. If there is a need to double the output the rent will change when the company occupies additional work space.

In accounting, an independent variable is ideally a factor that causes a change in the total amount of the dependent variable. In other words, an independent variable should be something that drives a mixed cost to increase or decrease.

In accounting, a dependent variable is likely to be the total of a mixed cost that will change as the result of several factors. A factor that causes the change in the total cost is referred to as the independent variable.

The coefficient of determination is symbolized by r-squared, where r is the coefficient of correlation. Hence, a coefficient of determination of 0.64 or 64% means that the coefficient of correlation was 0.8 or 80%. (The range for the coefficient of correlation is -1 to +1, and therefore the range for the coefficient of determination is 0 to +1.)

In simple linear regression analysis, the coefficient of correlation (or correlation coefficient) is a statistic which indicates the relationship between the independent variable and the dependent variable. The coefficient of correlation is represented by r and it has a range of -1.00 to +1.00.

When the coefficient of correlation is a positive amount, such as +0.80, it means an increase in the independent variable will result in an increase in the dependent variable. Also, a decrease in the independent variable will mean a decrease in the dependent variable.

When the coefficient of correlation is negative, such as -0.80, there is an inverse relationship. An increase in the independent variable will mean a decrease in the dependent variable. A decrease in the independent variable will mean an increase in the dependent variable.

When the coefficient of correlation is squared, it becomes the coefficient of determination. This means that an r of +0.80 or -0.80 will result in a coefficient of determination of 0.64 or 64%. This tells you that 64% of the change in the total of the dependent variable is associated with the change in the independent variable. An r of +0.20 or -0.20 indicates that only 4% (0.20 x 0.20) of the change in the dependent variable is explained by the change in the independent variable.

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