Contribution margin calculator

Formula

How it works

Contribution margin is price minus variable cost. As a ratio of price it shows how much of each sale remains after variable costs to cover fixed costs and profit.

Worked example

The same calculation with the default values:

• Selling price per unit 50
• Variable cost per unit 30
• Units sold 1,000

1. 50 − 30 = 20 per unit
2. ratio = 20 ÷ 50 × 100 = 40%
3. total = 20 × 1,000 = 20,000

Result: Contribution per unit: 20.00 USD · Contribution margin ratio: 40% · Total contribution: 20,000.00 USD

Common mistakes

• Treating a positive contribution margin as proof the business is profitable - it only means each unit sold covers its own variable cost and contributes something toward fixed costs, not that fixed costs are actually covered yet.
• Leaving out variable costs that scale with sales but aren't obviously "per unit" (payment processing fees, sales commissions, shipping) - omitting them inflates the apparent contribution margin.
• Comparing contribution margin ratio across products with very different price points without also looking at total volume - a high-ratio, low-price product can contribute less total profit than a lower-ratio, high-price one.