Contribution margin calculator: per unit, as a ratio and per product
Enter revenue, variable costs, fixed costs and units sold to see your contribution margin in total, per unit and as a share of revenue, and what is left after fixed costs.
Short answer
Contribution margin = revenue − variable costs. Per unit it is selling price − variable cost per unit. With 750,000 of revenue and 450,000 of variable costs, contribution is 300,000: 40% of revenue, or 60 per unit at 5,000 units. After 240,000 of fixed costs, 60,000 of operating profit remains.
Contribution margin calculator
Amounts excluding VAT, for the same period. Variable costs rise with sales volume, fixed costs do not. Any currency works.
- Contribution per unit
- 60.00
- Contribution margin ratio
- 40.0%
- Operating profit
- 60,000
- Total contribution margin
- 300,000
Contribution margin formulas
| Measure | Formula | Example |
|---|---|---|
| Total contribution margin | revenue − variable costs | 750,000 − 450,000 = 300,000 |
| Contribution per unit | selling price − variable cost per unit | 150 − 90 = 60 |
| Contribution margin ratio | contribution ÷ revenue × 100% | 300,000 ÷ 750,000 = 40% |
| Operating profit | contribution − fixed costs | 300,000 − 240,000 = 60,000 |
The name says it: this amount contributes to covering fixed costs. Only once they are covered do you make a profit. That is why contribution is also the basis of the break-even point.
Contribution margin looks like gross margin but is not the same: gross margin deducts only the cost of goods, contribution deducts every cost that moves with volume, including shipping, payment fees and commission.
Contribution per product or customer
Contribution is most useful per product, product group or customer. It shows which products pay for your fixed costs and which only add revenue.
| Product | Revenue | Variable costs | Contribution | Ratio |
|---|---|---|---|---|
| A | 400,000 | 220,000 | 180,000 | 45% |
| B | 250,000 | 160,000 | 90,000 | 36% |
| C | 100,000 | 70,000 | 30,000 | 30% |
| Total | 750,000 | 450,000 | 300,000 | 40% |
Product C has the lowest contribution but still adds 30,000. Drop it without removing any fixed costs and profit falls by 30,000. Base decisions on contribution, not on a profit per product with fixed costs spread over it.
Several levels of contribution
In a more detailed costing you deduct costs in steps. The first level is revenue minus variable costs. The second deducts fixed costs that belong directly to a product group, such as a machine or a product manager. What remains contributes to general overheads such as the office and management. Each level shows which product group pays its own way.
How to improve contribution
- Review prices per product. A small price rise on a low-contribution product has a relatively large effect.
- Cut variable costs. Purchase terms, packaging and shipping cost per order.
- Steer the mix. Show sales the contribution per product, not just revenue.
- Price discounts properly. A 10% discount on a product with a 40% contribution ratio costs a quarter of its contribution. You then need to sell a third more to keep the same amount.
Getting the figures from your accounts
Revenue and purchases per product come from your accounts or sales system, other variable costs often from separate expense accounts. Decide once which costs are variable. With DigiData you connect, for example, Xero or Exact Online with your web shop or CRM, and the financial dashboard shows contribution per product, customer and month.
Frequently asked questions
What is the difference between contribution margin and gross profit?
Gross profit is revenue minus the cost of goods sold. Contribution margin deducts all variable costs, including shipping, payment fees and commission. In wholesale they are close; for a producer or web shop the difference can be large.
What is a good contribution margin ratio?
One that comfortably covers fixed costs at realistic sales. As a percentage it varies widely: wholesale often runs at 15 to 25%, software and consulting at 70% or more. Compare each product with your own average.
Are staff costs variable or fixed?
Permanent staff are usually fixed: the cost does not change when you sell more this month. Agency workers, on-call staff and contractors paid by the hour are variable.
Can contribution be negative?
Yes, when the selling price is below the variable cost. Every extra sale then costs money. It happens mostly with deep discounts or products with high shipping costs.
Contribution per product and customer, updated every day
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