Contribution Margin Calculator

Contribution margin per unit = Selling price − Variable cost per unit. The contribution margin ratio = contribution margin ÷ selling price × 100. It measures how much each sale contributes toward covering fixed costs and generating profit, after covering the costs that scale with volume.

Contribution margin only subtracts variable costs (materials, direct labor, shipping, fees — costs that change with volume). Gross margin typically subtracts cost of goods sold, which can include some fixed manufacturing overhead too. Contribution margin is the number used for break-even and target-profit analysis.

Break-even units = Fixed costs ÷ Contribution margin per unit. Below that many units sold, your contribution margin hasn't covered fixed costs yet and you're operating at a loss; above it, each additional unit is pure profit (before any new fixed costs).

It varies hugely by industry — software and digital products often see 70-90%+ since variable costs are minimal, while retail and manufacturing often run 20-40%. Compare your ratio against your own historical trend and close competitors rather than a universal benchmark.