Contribution Margin

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

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

Gross margin % = (Revenue − COGS) / Revenue. Profit before operating expenses.

Break-Even Units

Units = Fixed Costs / (Price − Variable Cost per unit).

Markup vs Margin Calculator

Markup % = (price − cost) / cost. Margin % = (price − cost) / price. Common confusion.

Customer Lifetime Value (LTV)

LTV = ARPU × gross margin × lifetime. Foundational SaaS unit economics.

CAC Payback Period

Months = CAC / (ARPU × gross margin). Time to recover acquisition cost.

Churn Rate Calculator

Monthly churn = customers lost / start customers. Annualized: 1 − (1−monthly)^12.

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Gross margin % = (Revenue − COGS) / Revenue. Profit before operating expenses.

Markup vs Margin Calculator

Markup % = (price − cost) / cost. Margin % = (price − cost) / price. Common confusion.

Break-Even Units

Units = Fixed Costs / (Price − Variable Cost per unit).

Customer Lifetime Value (LTV)

LTV = ARPU × gross margin × lifetime. Foundational SaaS unit economics.

CAC Payback Period

Months = CAC / (ARPU × gross margin). Time to recover acquisition cost.

Break-Even Calculator

Units (and revenue) you need to sell to cover your fixed costs.