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Contribution Margin Calculator

Find how much each sale contributes to fixed costs and profit: contribution margin per unit, the ratio, the total, operating profit and break even units.

Contribution margin per unit

18

Contribution margin ratio

36%

Total contribution margin

43,200

Sales revenue

120,000

Operating profit

13,200

Break even units

1,667units

Contribution margin = price − variable cost per unit; ratio = margin ÷ price × 100

How to calculate contribution margin

Contribution margin is what is left from each sale after the variable costs of that sale. It is the money that "contributes" to paying fixed costs such as rent and salaries; once those are covered, the rest is profit.

How to calculate contribution margin

  • Per unit: selling price − variable cost per unit
  • Ratio: contribution margin per unit ÷ price × 100
  • Total: contribution margin per unit × units sold
  • Operating profit: total contribution margin − fixed costs

Example: a product sells for 50 and its variable cost is 32, so each unit contributes 18, a 36% ratio. Selling 2,400 units gives 43,200; after 30,000 of fixed costs, the profit is 13,200. Break even is 30,000 ÷ 18 = 1,667 units.

Variable or fixed?

Variable costs (change with each unit)Fixed costs (stay the same)
Materials, packaging, piece rate labour, sales commission, card fees, shipping per orderRent, salaries, insurance, software, loan interest

Contribution margin vs gross margin

Gross margin takes away the cost of goods sold, which can include some fixed production costs. Contribution margin takes away only variable costs, so it shows how volume changes profit. Use the gross profit calculator for gross margin and the break even calculator for a full break even analysis.

Copy the result, or save it as a PDF to attach to an email or a report. Nothing you type leaves your browser.

Features

  • Margin per unit and ratio
  • Total contribution margin
  • Operating profit after fixed costs
  • Break even units
  • Formula shown
  • Copy or PDF

Frequently asked questions

What is a good contribution margin ratio?

It depends on the trade. Retail and distribution often run at 20 to 40%, software and services much higher. The ratio must be high enough for your volume to cover fixed costs.

Can contribution margin be negative?

Yes, when the variable cost is higher than the price. Every extra sale then loses money, so the price or the cost must change.

How is it used for break even?

Divide fixed costs by the contribution margin per unit to get break even units, or by the ratio to get break even sales.

Is the calculator free?

Yes. No sign up. It runs in your browser, and you can copy the result or save it as a PDF.

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