Business Tools

Contribution Margin Calculator

Calculate per-unit contribution margin, CM ratio, and total contribution for any product

Last updated: How we build & verify
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How it works

Isolates the revenue left over from each sale after variable costs, which is the money available to cover fixed costs and then produce profit. It is the right measure for deciding whether an extra unit, order, or product line is worth taking.

Formula
CM per unit = Price − Variable cost per unit
CM ratio = CM per unit / Price
Total CM = Revenue − Total variable costs
Variables
  • Pricerevenue per unit sold
  • Variable costmaterials, direct labour, shipping, processing fees
  • CM ratioshare of each revenue dollar that survives variable costs
Worked example
Inputs: Product priced at $45, variable cost $27, fixed costs $90,000
  1. CM per unit: 45 − 27 = 18
  2. CM ratio: 18 / 45 = 40%
  3. Units needed to cover fixed costs: 90,000 / 18 = 5,000
Result: $18 per unit, 40% CM ratio, break-even at 5,000 units
Notes
  • Contribution margin is not gross margin. Gross margin subtracts all cost of goods including fixed manufacturing overhead; contribution margin subtracts only genuinely variable costs.
  • When a shared resource is the bottleneck, rank products by contribution margin per unit of that constraint (machine hour, shelf slot, engineer week), not by margin percentage.
  • A product with negative contribution margin loses money on every additional sale. No volume increase can fix it; the price or the variable cost has to change.
  • Classify sales commissions and payment fees as variable. They scale with revenue and are often mistakenly left in fixed overhead.

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Frequently Asked Questions

Yes. Contribution Margin costs nothing, needs no account, and runs right in your browser. There is no paywall, no watermark on the results, and no limit on how many times you can run the numbers.

Contribution Margin uses the standard formula for this kind of calculation, so the output is only as good as the figures you type in. Rates, fees, and rules in finance shift over time, and we review the underlying assumptions on a regular schedule; check the "Last reviewed" date above for the most recent pass. Spotted something off? There's a feedback button in the bottom-right corner.

Contribution Margin | ExaCalc