Contribution Margin Calculator
Contribution margin per unit, as a ratio and in total, from the price, the variable cost of each unit and the units sold, plus the break-even point when you add fixed costs.
Result…
How it's calculated
Contribution margin per unit = price − variable cost per unit Ratio = margin per unit ÷ price × 100 Total = margin per unit × units Break-even units = fixed costs ÷ margin per unit Break-even revenue = fixed costs ÷ ratio
Contribution margin is what each sale leaves over, after the costs that come with that unit, to pay fixed costs and then make a profit. The ratio says how much of each unit of revenue contributes, so it lets you compare products with different prices. Dividing fixed costs by the margin per unit gives the break-even volume, rounded up to whole units; the break-even calculator explores that in more depth. The figures assume price and variable cost stay the same at every volume, which is rarely exactly true once discounts, bulk buying or extra shifts come in.
Your numbers, step by step
About the Contribution Margin calculator
This contribution margin calculator shows what each sale leaves over to pay fixed costs and make a profit. Enter the selling price and the variable cost of one unit, such as materials, packaging and delivery, plus any costs charged as a share of the price, such as card fees or commissions. It returns the contribution margin per unit, the contribution margin ratio and the total for the units you sold. Add the fixed costs for the period and it also gives the profit after fixed costs and the break-even point in units and in revenue. Small business owners, product managers and students of management accounting use it to compare products, test prices and plan sales targets. The working is shown step by step with your own numbers.
How to use it
- Enter the “Selling price per unit”.
- Enter the “Variable cost per unit”, and any “Variable costs as a % of price” such as payment fees.
- Enter the “Units sold” in the period you are looking at.
- Add the “Fixed costs for the period” to see the profit and the break-even point.
Worked example
A product sells for 50 and costs 22 per unit in variable costs, so the contribution margin is 50 − 22 = 28 per unit, a ratio of 28 ÷ 50 = 56%. Selling 1,000 units gives a total contribution of 28,000. With 18,000 of fixed costs the profit is 28,000 − 18,000 = 10,000, and break-even is 18,000 ÷ 28 = 642.9, so 643 units, or 18,000 ÷ 56% = 32,142.86 of revenue.
Updated
Questions people ask
How do you calculate contribution margin?
Subtract the variable cost of one unit from its selling price. Multiply by the units sold for the total, or divide by the price for the contribution margin ratio.
What is the difference between contribution margin and gross margin?
Contribution margin subtracts only costs that change with volume. Gross margin subtracts the cost of goods sold, which under many accounting rules also includes a share of fixed production overheads.
How is contribution margin used to find break-even?
Divide fixed costs by the contribution margin per unit to get break-even units, or by the ratio to get break-even revenue. The break-even calculator explores this in more depth.
Which costs count as variable?
Costs that rise with each unit sold: materials, packaging, delivery, sales commissions and payment fees. Rent, salaries and software subscriptions usually stay the same whatever you sell, so they are fixed.
What are the limits of a contribution margin analysis?
It assumes the price and variable cost per unit stay the same at every volume, which bulk discounts, overtime or price cuts can change. For pricing or investment decisions, check the figures with an accountant.