Contribution margin is the money left from each sale after paying the variable costs of producing it. It is the key number for break-even analysis, pricing and deciding which products to push.
How to use the Contribution Margin Calculator
- Selling price per unit
- Variable cost per unit
- Number of units
- Fixed costs
Results update as you type, and every field accepts the units shown in its menu.
How it works
Enter the selling price and variable cost per unit, the number of units and your fixed costs.
Tips
- Use figures for the same period (a month, a quarter or a year) for every input so ratios compare like with like.
- Track the metric over time – the trend usually tells you more than a single value.
- Compare your result with industry benchmarks, which vary a lot between sectors.
- Treat the result as a starting point for a decision, then check the assumptions behind each input.
Common mistakes to avoid
- Mixing monthly and yearly numbers in the same calculation.
- Using revenue where the formula needs profit (or the other way round).
- Forgetting hidden costs such as taxes, fees, overheads or your own time.
Inputs explained
| Field | What to enter |
|---|---|
| Selling price per unit | Amount in your currency |
| Variable cost per unit | Amount in your currency |
| Number of units | A number |
| Fixed costs | Amount in your currency |
What each result means
- Contribution margin per unit = [Selling price per unit] – [Variable cost per unit]
- Contribution margin ratio = ([Selling price per unit] – [Variable cost per unit])÷[Selling price per unit]×100
- Total contribution margin = ([Selling price per unit] – [Variable cost per unit])×[Number of units]
- Profit (after fixed costs) = [Total contribution margin] – [Fixed costs]
- Break-even units = ceil([Fixed costs]÷([Selling price per unit] – [Variable cost per unit]) – 0.000001)
Example values
How the main result changes when Selling price per unit changes and everything else stays at the example values above:
| Selling price per unit | Contribution margin ratio (%) |
|---|---|
| 25 | -20 |
| 37.5 | 20 |
| 50 | 40 |
| 62.5 | 52 |
| 75 | 60 |
| 100 | 70 |
Formula
Contribution margin per unit = price − variable cost per unitCM ratio = CM ÷ priceTotal contribution = CM × units; profit = total contribution − fixed costsWorked example
Inputs — Selling price per unit: $50; Variable cost per unit: $30; Number of units: 1,000; Fixed costs: $15,000.
Results — Contribution margin per unit = $20.00; Contribution margin ratio = 40 %; Total contribution margin = $20,000.00; Profit (after fixed costs) = $5,000.00; Break-even units = 750.
Frequently asked questions
What is a good contribution margin ratio?
It depends on the industry; higher ratios leave more to cover fixed costs.
How is contribution margin different from gross margin?
Contribution margin subtracts only variable costs; gross margin subtracts all cost of goods sold.
Can contribution margin be negative?
Yes, if variable costs exceed the price – each sale then loses money.
What formula does the Contribution Margin Calculator use?
Contribution margin per unit = price − variable cost per unit.