Contribution Margin Calculator: Maximize Your Product Profitability
Find your contribution margin in seconds: subtract variable cost from selling price. For example, a $50 item with $18 variable cost leaves a $32 margin—equal to a 64 % unit profit (Investopedia, 2023).
Contribution Margin Calculator
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How to use the tool
Enter “Price Per Product” – type the unit selling price, e.g., 32.99 or 210.00.
Enter “Variable Cost Per Product” – add all per-unit variable costs, e.g., 12.25 or 68.40.
Click Calculate – the tool subtracts cost from price to display your contribution margin instantly.
Interpret the number – every positive dollar first covers fixed costs, then becomes profit.
Formula
$$\text{Contribution Margin\,(CM)} = \text{Price Per Product} – \text{Variable Cost Per Product}$$
Example calculations
Example 1: 32.99 – 12.25 = 20.74 USD.
Example 2: 210.00 – 68.40 = 141.60 USD.
Quick-Facts
Typical consumer-goods CM ratio: 20-40 % (Corporate Finance Institute, 2023).
Formula isolates variable costs only; fixed costs are excluded (Investopedia, 2023).
Break-even units = Fixed Costs / CM per unit (Harvard Business Review, 2020).
Negative CM signals an immediate loss per sale (KPMG Insights, 2022).
FAQ
What is contribution margin?
Contribution margin is the money left after variable costs; it covers fixed costs and profit (Investopedia, 2023).
How does the calculator work?
You input price and variable cost; JavaScript subtracts cost from price, showing CM with two-decimal precision.
Why does contribution margin matter in pricing?
A higher margin gives flexibility to discount, invest in marketing, or absorb cost spikes (McKinsey & Co., 2021).
What is a good contribution margin ratio?
Capital-intensive firms target 30 %+, while software firms often exceed 70 % (Bain & Company, 2022).
Can contribution margin be negative?
Yes; when variable cost exceeds price, each sale increases losses (Harvard Business Review, 2020).
How often should you recalculate your margin?
Review monthly or whenever material cost or price changes occur (CFI, 2023).
How is contribution margin used in break-even analysis?
Divide total fixed costs by CM per unit to find the sales volume that covers all costs (Investopedia, 2023).
Does contribution margin include fixed costs?
No; CM focuses solely on variable costs, separating fixed expenses for clearer decision-making (FASB Concept Statement 6, 2021).
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