Contribution margin calculator

Contribution margin is price minus variable cost per unit: what each sale leaves to pay fixed costs, then profit. A $500 service with $200 of variable cost contributes $300, a 60% contribution margin ratio. Forty sales contribute $12,000; after $6,000 of fixed costs, operating profit is $6,000.

Contribution margin per unit: $300
Contribution margin ratio: 60%
Total contribution: $12,000
Operating profit: $6,000
Degree of operating leverage: 2
Break-even units: 20

Formula

Contribution margin per unit = Price − Variable cost per unit
Contribution margin ratio = Contribution margin ÷ Price
Total contribution = Contribution per unit × Units sold
Operating profit = Total contribution − Fixed costs
Degree of operating leverage = Total contribution ÷ Operating profit

Worked example

A cleaning visit sells for $80 and uses $20 of variable costs. What is its contribution margin ratio, as a percentage?

$80 − $20 = $60.
$60 ÷ $80 = 0.75 = 75%.

Answer: 75%

From the lesson Contribution Margin.

Do it in your head: Price minus every variable cost

What one sale contributes.

Add up every cost that comes with each sale.
Subtract that total from the price.
Leave out fixed costs like rent. They do not come with each sale.

Operating leverage at different volumes

Price $500, variable cost $200, fixed costs $6,000 a month.

Operating leverage at different volumes
Units sold	Total contribution	Operating profit	Operating leverage
30	$9,000	$3,000	3
40	$12,000	$6,000	2
50	$15,000	$9,000	1.67
60	$18,000	$12,000	1.5

Try three

A service sells for $560. Variable costs are $165 of materials and $130 of travel per job. Rent is $3,600 a month. What does each job contribute toward fixed costs and profit?

Your answer
Show the answer
$265.00
1. Contribution = price − all variable costs = $560 − ($165 + $130) = $560 − $295 = $265.
2. Rent is fixed, so it isn't subtracted per job.
A custom cake sells for $1,730 and uses $519 of variable costs. What is its contribution margin ratio, as a percentage?

Your answer
Show the answer
70%
1. Ratio = contribution ÷ price = ($1,730 − $519) ÷ $1,730 = $1,211 ÷ $1,730 = 70%.
2. Each sales dollar leaves 70 cents for fixed costs and profit.
43 customers each pay $1,850 a month and each costs $470 in variable costs. Fixed costs are $30,500 a month. What is monthly operating profit?

Your answer
Show the answer
$28,840.00
1. Total contribution = 43 × ($1,850 − $470) = 43 × $1,380 = $59,340; minus fixed $30,500 = $28,840.

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Learn it properly: Contribution Margin → · the course: Contribution Margin

Related lessons: Break-Even · Fixed, Variable & Step Costs

Questions

Is contribution margin the same as gross margin?

No. Contribution subtracts every variable cost, the costs that come with each sale. Gross profit subtracts the cost of goods sold. They match only when those are the same costs.

Is contribution margin profit?

Not yet. Contributions first pay the fixed costs, like rent. In the example, forty sales contribute $12,000 but the profit is $6,000.

What does the contribution margin ratio tell me?

How many cents of each sales dollar are left for fixed costs and profit. At a 60% ratio, each extra $100 of sales adds $60 toward them.

What is the degree of operating leverage?

Total contribution divided by operating profit: how many times faster profit moves than sales. In the example it is 2, so a 10% rise in sales lifts operating profit by 20%.

How does it give break-even?

Divide the fixed costs by the contribution per unit and round up. The break-even calculator does it for you.

Related free tools

Formulas and examples checked against Doing Math’s verified lesson Contribution Margin, September 27, 2026. Every number on this page is computed by the calculator’s own code.