CONTRIBUTION MARGIN

Contribution Margin Calculator

Subtract variable costs from period revenue to get contribution margin, then apply fixed costs for operating profit and break-even revenue.

What contribution margin measures

Contribution margin is revenue after costs that move with volume. The remainder is what can cover fixed costs and then become profit. It is a cost-structure view of a product mix or a whole period.

Contribution margin = revenue − variable costs
Contribution margin ratio = contribution margin ÷ revenue
Operating profit after fixed costs = contribution margin − fixed costs
Break-even revenue = fixed costs ÷ contribution margin ratio

Example

$50,000 of revenue and $30,000 of variable costs is $20,000 of contribution and a 40% ratio. After $12,000 of fixed costs, operating profit is $8,000. Break-even revenue at the same ratio is $30,000.

Variable versus fixed

Materials, per-order shipping, and payment fees usually move with volume. Rent and salaried payroll are usually closer to fixed. Keep the split consistent for the period you are measuring.

Frequently asked questions

Is contribution margin the same as gross margin?

Not always. Gross margin usually follows accounting cost of goods sold. Contribution margin subtracts only variable costs, which can be a different set.

What if variable costs exceed revenue?

Contribution is negative. Selling more of the same mix cannot cover fixed costs, so break-even revenue is not applicable.

Can fixed costs be zero?

Yes. If the contribution ratio is positive, break-even revenue is $0.

Does this replace an income statement?

No. It is a planning view and does not handle a full chart of accounts, tax, or recognition timing.

More calculators

Break-Even Calculator →Gross Margin Calculator →Inventory Turnover Calculator →

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