Contribution

1. The amount that. under *marginal-costing principles, a given transaction produces to cover fixed overheads and to provide profit. The unit contribution is normally taken to be the selling price of a given unit of merchan dise less the variable costs of producing it. Once the total contributions exceed the fixed overheads, all further contribu­tion represents pure profit. The total contribution is the product of the unit contribution and the number of units produced. This is based on the assump­ tions that the marginal cost and th sales value will be constant.
2. The sharing of claim payments between two or more insurers who find themselves insuring the same item, against the same risks, for the same person. As that person is not entitled to claim more than the full value of the item once, each insurer pays a share. For example. if a coat was stolen from a car. it might be insured under both a personal-effects insurance and a motor policy. As the policyholder is only entitled to the value of the coat (and can­ not profit from the theft), each insure r contributes half of the loss.