Contribution Margin Calculator
Contribution margin is what is left from each sale after the variable costs — the money that "contributes" toward your fixed costs and profit. Enter the price and the variable cost per unit.
Your numbers
Result
- As a percentage
- 40%
- Selling price
- $100.00
| Item | Value |
|---|---|
| Selling price | $100.00 |
| Variable cost | $60.00 |
| Contribution margin | $40.00 |
What contribution margin is
It is price − variable cost: the per-sale cost of goods, commissions and fees that scale with volume. Selling at $100 with $60 of variable cost leaves a $40 contribution margin per unit — money that goes toward rent, salaries and other fixed costs before any of it is profit.
Why it drives break-even
Contribution margin is the engine of the break-even point: divide your fixed costs by the per-unit contribution margin to find how many units you must sell to stop losing money. A higher contribution margin covers the fixed costs with fewer sales.
Margin dollars vs. ratio
The dollar figure tells you how much each sale contributes; the ratio (margin ÷ price) lets you compare products of different prices on the same footing. A cheap item with a high ratio can out-earn a pricey one with a thin ratio once volume is factored in.
Frequently asked questions
Sources
- Managerial accounting — contribution margin
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