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Contribution Margin Calculator

This contribution margin calculator works from selling price and variable costs: it shows how much of each unit sold is left to cover fixed costs. At a price of $25 and variable costs of $10 that is $15 per unit, a 60% ratio – with operating profit and break-even.

Example: Selling price per unit (net) 25 $ · Variable cost per unit 10 $ · Units sold 1,000 units · Fixed costs for the period 9,000 $ → Contribution margin per unit: Contribution margin per unit: $15.00. Source: Wikipedia – Deckungsbeitragsrechnung. Updated: .

$
Net, before sales tax
$
Materials, direct labor, packaging, commission – anything that rises with each extra unit
units
Planned or actual quantity for the period
$
Rent, salaries, insurance, depreciation – independent of volume
$
The quantity needed for it is worked out; 0 ignores the field
My ToolboxYour inputs are saved in this browser only.

Result

Contribution margin per unit
Contribution margin per unit: $15.00
Key figures
  • Contribution margin ratio: 60% of the price
  • Total contribution margin: $15,000.00 on 1,000 units
  • Operating profit: $6,000.00
  • Break-even: from 600 units a profit is possible (revenue $15,000.00)
  • Margin of safety: 40% of the volume can fall away before a loss arises
Contribution income statement
ItemAmount
Revenue$25,000.00
Variable costs− $10,000.00
Contribution margin$15,000.00
Fixed costs− $9,000.00
Operating profit$6,000.00
Working
  • Contribution margin per unit = price − variable cost = $25.00 − $10.00 = $15.00
  • Contribution margin ratio = contribution margin ÷ price = $15.00 ÷ $25.00 = 60%
  • Break-even quantity = fixed costs ÷ contribution margin per unit = $9,000.00 ÷ $15.00 = 600 units

How it is calculated

The contribution margin is the amount a product contributes toward fixed costs and profit after its variable costs are deducted. Formula: contribution margin = selling price − variable cost per unit. Profit arises only when the sum of all contribution margins exceeds the fixed costs.

The key figures in the calculator

What is it used for?

For price floors, product-line decisions (“should I keep this product?”) and quotes: in the short run any order with a positive contribution margin pays off as long as capacity is free. It is not the same as the profit margin, which shows profit per sale after all costs – for markup and margin there is the margin calculator, and the break-even calculator covers the profit threshold in detail. Your inputs stay on your device; the calculator does not replace figures from your accounting.

Frequently asked questions

How do you calculate the contribution margin?

Contribution margin = selling price − variable costs, per unit or in total. With a $25 price and $10 variable cost it is $15 per unit.

How do you calculate the contribution margin ratio?

Contribution margin ratio = contribution margin ÷ revenue × 100. For $15 on a $25 price that is 60%.

What counts as a variable cost?

All costs that rise with volume: materials, direct labor, packaging, shipping, commissions and per-unit license fees. Rent or salaries, by contrast, are fixed.

What is the difference between contribution margin and profit?

The contribution margin deducts only variable costs. Subtract the fixed costs from it and what remains is the profit (operating profit).

When does an order pay off despite a low price?

In the short run, when the price is above variable costs and capacity is free: the order then helps cover fixed costs that arise anyway. In the long run total contribution margin must exceed fixed costs.

Sources and legal basis

As of: · Editorial policy

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