Contribution Margin Calculator
The contribution margin tells you how much revenue from each sale is available to cover fixed costs and generate profit. Use this free tool to quickly find your contribution margin per unit and ratio — two of the most important metrics in pricing and profitability analysis.
The amount you charge customers for one unit.
Costs that vary directly with each unit produced.
Contribution Margin Calculator
The contribution margin tells you how much each unit sold contributes to covering your fixed costs and generating profit. It is a critical metric for pricing strategy, break-even analysis, and profitability planning. Enter your selling price and variable cost per unit to see your margin.
What Is Contribution Margin?
Contribution margin is the amount remaining from sales revenue after deducting variable costs. It is expressed both as a per-unit dollar amount and as a ratio (percentage).
- Contribution Margin Per Unit = Price per Unit − Variable Cost per Unit
- Contribution Margin Ratio = (Price − Variable Cost) ÷ Price × 100
How to Interpret Your Results
A higher contribution margin means more of each sale goes toward covering fixed costs and generating profit. Businesses with high contribution margins (e.g., software) can reach profitability faster than businesses with low margins (e.g., grocery retail) that depend on volume.
If your contribution margin is negative, you are losing money on every unit sold — your price is below your variable cost. This is unsustainable without a clear strategy (such as a loss leader to acquire customers).
Use contribution margin to compare product lines, evaluate pricing changes, and decide which products to prioritize when allocating resources. For a complete break-even analysis, check out our Break-Even Point Calculator.
Contribution Margin in Practice
Imagine you sell a product for $100 with a variable cost of $40. Your contribution margin per unit is $60, and your ratio is 60%. This means that every time you sell one unit, $60 is available to pay down fixed costs like rent and salaries. Once fixed costs are fully covered, that same $60 per unit becomes pure profit.
When comparing two products, the one with the higher contribution margin ratio may deserve more marketing investment — even if it has a lower absolute price point.