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Contribution Margin

Work out profit per unit and how many sales cover fixed costs.

About Contribution Margin

Contribution per unit is price minus variable cost, and dividing fixed costs by it gives the break-even volume. Contribution margin tells you how each sale chips away at overhead once variable costs are covered.

Formula

Contribution Margin

CM = price - variable cost; margin = CM / price; B/E units = fixed / CM

variable cost
Cost that scales with each unit sold

Worked example

With the default values below, Contribution Margin returns Contribution per Unit of $20. Change any input above and every figure here is recalculated in your browser.

Inputs used

Selling price per unit
50
Variable cost per unit
30
Total fixed costs
20,000

Results

Contribution per Unit
$20
Contribution Margin
40.0%
Break-Even Units
1,000

Step by step

  1. 1Values used
  2. 2Contribution Margin
  3. 3Contribution per Unit= 20
  4. 4Contribution Margin= 40.0
  5. 5Break-Even Units= 1,000

Assumptions and limits

  • The result is derived only from the 3 inputs listed above. Anything not among them is not part of the calculation.
  • In particular, this calculator does not take inflation, tax or compounding frequency into account.
  • Figures are rounded for display to 1 decimal place, so totals built from several rounded parts can differ slightly from the unrounded arithmetic.
  • This is an estimate for general information and not professional financial, tax or legal advice. See the full disclaimer for the limits that apply to this kind of calculator.

How these calculators are built and tested is described on the Methodology page. If a figure looks wrong, please report it.

Frequently Asked Questions

How is Contribution Margin calculated?

CM = price - variable cost; margin = CM / price; B/E units = fixed / CM Contribution per unit is price minus variable cost, and dividing fixed costs by it gives the break-even volume.

Why does Contribution Margin matter?

Contribution margin tells you how each sale chips away at overhead once variable costs are covered.

What values do I need to enter?

This calculator takes 3 inputs: Selling price per unit, Variable cost per unit, Total fixed costs. The pre-filled defaults are a realistic starting point — replace them with figures from your own environment for a result you can act on.

Related Calculators

Contribution Margin – Calculate Contribution per Unit