📊 Contribution Margin Calculator
Calculate contribution margin per unit, total contribution margin, and CM ratio. See how much each sale contributes toward covering fixed costs and generating profit.
How Contribution Margin Works
Contribution margin (CM) is the amount remaining after variable costs are subtracted from revenue. It "contributes" first to covering fixed costs, then to profit once break-even is reached. Formula: CM per Unit = Selling Price − Variable Cost per Unit. CM Ratio = CM per Unit ÷ Selling Price × 100.
Contribution Margin vs Gross Profit
Contribution margin separates costs into variable and fixed, while gross profit separates COGS from operating expenses. CM is more useful for break-even analysis and pricing decisions because it directly shows how much each additional sale improves profitability. A product with a 60% CM ratio generates $0.60 of contribution toward fixed costs and profit for every $1.00 of revenue.
People Also Ask
CM ratios vary by industry. Software/SaaS: 70–90%. Manufacturing: 30–60%. Retail: 20–50%. Restaurants: 60–70% on food, but high fixed overhead. A ratio above 40% is generally healthy for a product business. Below 20% means fixed costs consume most of your revenue.
Contribution margin is revenue minus variable costs only — it does not subtract fixed costs. Net profit subtracts all costs (fixed and variable). At the break-even point, total contribution margin exactly equals total fixed costs, producing $0 net profit.
Yes — if variable cost per unit exceeds selling price, CM is negative. Every sale makes the loss worse. This happens when pricing is set below variable cost (e.g. a launch promotion) or when variable costs spike unexpectedly. A negative CM cannot be offset by selling more volume.