Enter your selling price and variable cost per unit to see the contribution margin, its ratio, and how much each sale contributes to fixed costs and profit.
Contribution margin is the money left from each sale after covering the variable costs of producing it. That leftover "contributes" first to covering your fixed costs and then to profit. It is the foundation of break-even analysis and one of the most useful numbers for pricing and product decisions.
Per unit: Contribution Margin = Selling Price − Variable Cost. Sell for $50 with $30 of variable cost and each unit contributes $20. The contribution margin ratio = Contribution Margin ÷ Selling Price × 100, or 40% here — meaning 40 cents of every sales dollar is available to cover fixed costs and profit.
They are related but not identical. Gross margin subtracts all cost of goods sold, including some fixed manufacturing costs. Contribution margin subtracts only variable costs, which makes it the right tool for decisions about volume, pricing, and whether to accept a special order.
Tip: Break-even units = Fixed Costs ÷ Contribution Margin per unit. With $8,000 in fixed costs and a $20 contribution margin, you need to sell 400 units to break even. Every unit after that adds $20 straight to profit.
A higher contribution margin means each sale does more work covering fixed costs, so you reach profitability with fewer units. It also guides which products to promote: prioritize items with strong contribution margins, and reconsider those where price barely clears variable cost. This calculator ties it together — per-unit margin, ratio, break-even point, and profit at your chosen volume.