Formula
Contribution margin is the share of the price left after variable cost:
Contribution margin = (price − variable cost) / price
Total contribution multiplies the per-unit amount by the units you enter. Fixed costs are not subtracted here.
Assumptions
- Every unit has the same price and variable cost.
- Fixed costs are covered by the total, not removed inside it.
Worked example
A $40.00 price, $15.00 variable cost, and 500 units have a contribution margin of 62.50%.
Input definitions
- Variable cost
- The cost that appears once for each unit. Zero is allowed.
- Units
- How many units the total contribution covers. Zero shows the ratio only.
Limitations
This is a planning estimate, not accounting, tax, payroll, or advertising advice. The currency control changes the symbol only.
Questions
How is this different from break-even?
Break-even divides fixed costs by the contribution to find a unit count. This page starts from a unit count you already have.
What if variable cost is above the price?
The margin is negative. Those units do not contribute toward fixed costs.