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Contribution Margin Calculator
Determine how much each product contributes to your fixed costs and profit after covering variable costs. Contribution margin helps you make strategic decisions about your product mix and pricing.
Contribution Margin ($):
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Contribution Margin Ratio (%):
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How to Calculate Contribution Margin
The contribution margin is calculated using these formulas:
Contribution Margin = Selling Price per Unit - Variable Cost per Unit
Contribution Margin Ratio = (Contribution Margin / Selling Price) × 100%
The contribution margin shows how much revenue from each unit sold is available to cover fixed costs and generate profit.
Why Contribution Margin Matters
Contribution margin is crucial for business decisions because it:
- Helps determine which products are most profitable
- Guides pricing decisions and sales strategies
- Assists in break-even analysis
- Supports decisions about product mix and focus
A higher contribution margin means that a product contributes more to covering fixed costs and generating profit.
How to Use This Calculator
- Enter the selling price per unit of your product or service
- Enter the variable cost per unit (costs that change with production volume)
- Click "Calculate" to see your contribution margin per unit and contribution margin ratio
Use these results to compare different products and make strategic decisions about which ones to prioritize.