Contribution Margin

CM = Revenue − Variable Costs. CM ratio = CM / Revenue.

Inputs

Result

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How to use this calculator

  • Enter price + variable cost + units.

About this calculator

Contribution margin = revenue minus variable costs (vs. gross margin which uses COGS). CM is what each unit "contributes" toward fixed costs + profit. Used for break-even analysis, product mix decisions, special-order pricing. CM > 0 = each sale helps. CM < 0 = each sale loses money (stop selling). 80% CM ratio (typical SaaS) is enviable. 30% CM ratio (typical manufacturing) requires high volume.

Frequently asked

CM vs. gross margin?+
CM uses variable costs (changes with units). GM uses COGS (broader — may include some fixed overhead). For pricing decisions, CM more useful.
When to use CM?+
Special orders, break-even, product mix optimization. CM-based pricing decisions are more honest than GM-based.
Negative CM = ?+
Each unit loses money on direct costs alone. Stop selling, or restructure pricing/cost.
Multi-product?+
Use weighted-average CM ratio. Or compute per-product CM, allocate fixed costs by some basis.
CM and break-even?+
Break-even units = fixed costs / CM per unit. The ratio shows how quickly each marginal unit chips at fixed costs.

Related calculators

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Gross margin % = (Revenue − COGS) / Revenue. Profit before operating expenses.
Break-Even Units
Units = Fixed Costs / (Price − Variable Cost per unit).
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