Contribution Margin Calculator
Calculate contribution margin, ratio, and break-even analysis for business profitability
Calculate Contribution Margin
Revenue received per unit sold
Direct costs that vary with production
Total units produced or sold
Costs that don't change with production volume
Contribution Margin Results
Financial Summary
Break-Even Analysis
Formula: Contribution Margin = (Selling Price × Units) - (Variable Cost × Units)
Ratio Formula: CM Ratio = Contribution Margin ÷ Total Revenue × 100
Profitability Analysis
Example Calculation
Manufacturing Business Example
Product: Custom widgets
Selling price per unit: $12.00
Variable cost per unit: $8.00 (materials, labor)
Number of units: 100,000
Fixed costs: $200,000 (rent, salaries, etc.)
Calculation
Contribution Margin = ($12 × 100,000) - ($8 × 100,000)
Contribution Margin = $1,200,000 - $800,000 = $400,000
CM Ratio = $400,000 ÷ $1,200,000 × 100 = 33.33%
Total Profit = $400,000 - $200,000 = $200,000
Contribution Margin Insights
High Margin (>50%)
Strong pricing power and cost control
Medium Margin (30-50%)
Room for improvement in efficiency
Low Margin (<30%)
Consider pricing or cost optimization
Industry Benchmarks
Optimization Tips
Increase selling prices while maintaining demand
Negotiate better rates with suppliers
Improve production efficiency
Focus on high-margin products
Reduce material waste and costs
Understanding Contribution Margin
What is Contribution Margin?
Contribution margin is the difference between a product's revenue and its variable costs. It represents how much money is available to cover fixed expenses and contribute to profit after accounting for the variable costs of production.
Why is it Important?
- •Helps determine product profitability
- •Guides pricing and cost decisions
- •Essential for break-even analysis
- •Compares performance across products
Key Formulas
CM = (Price × Units) - (Variable Cost × Units)
Total Contribution Margin
CM Ratio = CM ÷ Total Revenue × 100
Contribution Margin Ratio
Break-Even = Fixed Costs ÷ CM per Unit
Break-Even Point in Units
Variable Costs: Materials, direct labor, commissions, shipping
Fixed Costs: Rent, salaries, insurance, depreciation