Contribution margin calculator
See how much each sale—or all sales together—contributes toward fixed costs and operating profit.
- Contribution per unit
- $60
- Units sold
- 100
- Total contribution margin
- $6,000
- Contribution margin ratio
- 60.0%
Fixed costs are not deducted. Contribution margin is what remains to cover them and then operating profit.
Included
- Contribution margin per unit
- Total contribution margin for a quantity sold
- Contribution margin ratio as a percentage of sales
- A total-sales mode when you do not have per-unit figures
Not included
- Fixed costs, tax and financing costs
- A decision about which expenses your business should classify as variable
- Profit after all business expenses
What this means
Contribution margin is sales minus variable costs. It is the amount left to cover fixed costs; after fixed costs are covered, the remainder contributes to operating profit.
In per-unit mode, multiply the contribution from one unit by the number sold. In totals mode, subtract total variable costs directly from total sales. The ratio divides contribution margin by sales, making products or periods easier to compare at different scales.
A cost is variable here only when it changes with the activity being measured. Materials and transaction fees are common examples; rent is commonly fixed over a normal planning period. Real cost behaviour can be mixed, so use classifications that fit your decision.
Formula & worked example
contribution margin per unit = selling price − variable cost per unit total contribution margin = total sales − total variable costs contribution margin ratio = contribution margin ÷ sales × 100
Sell 250 items at $80 each with $30 variable cost per item
- Contribution per item: $80 − $30
- $50
- Total contribution: $50 × 250
- $12,500
- Contribution margin ratio: $50 ÷ $80
- 62.5%
$12,500 is available to cover fixed costs and then operating profit.
How this calculation works
The calculation follows the formulas, definitions and assumptions explained on this page. The references below support the method and any stated boundaries.
Official sources
- OpenStax — contribution margin — Per-unit, total and ratio definitions
- Penn State Extension — price and pricing worksheet — Worked contribution-margin, break-even and profit-goal method
- U.S. Small Business Administration — break-even point — US government definition of contribution margin and its ratio