Pricing & profit

Contribution Margin Calculator

Measure the amount each unit contributes toward fixed costs and profit.

Free, no sign-upRuns in your browserReviewed October 2026Formula & methodology
US dollars
US dollars
units

Results update as you type. Your numbers stay in this browser.

Contribution per unitExample$30.00
Contribution margin
60%
Total contribution
$6,000

Understand the result

What is contribution margin?

Contribution margin is what each sale leaves after its variable costs, available to pay fixed costs and then profit. Per unit it is price minus variable cost; as a ratio it is that amount divided by price. A $50 product with $20 of variable costs contributes $30, a 60% contribution margin.

Per unitPrice − Variable cost per unit
RatioContribution per unit ÷ Price × 100
TotalContribution per unit × Units sold

Contribution margin answers a different question from gross margin. Gross margin uses accounting cost of goods sold; contribution margin uses only costs that rise and fall with each sale, including shipping, payment fees and commissions. That makes it the right number for break-even, discount and ad-spend decisions.

Example: an online print shop

A poster sells for $50. Printing, packaging, shipping and payment fees cost $20 per order. The shop sells 200 posters a month and has $4,500 of fixed costs.

  1. Contribution per poster: $50 − $20 = $30
  2. Contribution margin ratio: $30 ÷ $50 = 60%
  3. Total contribution: $30 × 200 = $6,000
  4. Operating profit: $6,000 − $4,500 = $1,500

Common mistakes

  • Including fixed costs. Rent and salaries do not change per sale; subtract them after contribution, not inside it.
  • Forgetting fees per order. Card, marketplace and shipping fees are variable and often the difference between a good and a thin contribution.
Common questions

Contribution Margin FAQ

What is the difference between contribution margin and gross margin?

Gross margin subtracts cost of goods sold as defined by your accounting. Contribution margin subtracts every variable cost, including selling costs like shipping and payment fees, and excludes fixed production overhead.

What is a good contribution margin?

High enough that total contribution covers fixed costs at a sales volume you can realistically reach. Use the break-even calculator to test that volume.

Can contribution margin be negative?

Yes, when variable costs exceed the price. Every additional sale then increases losses.

Guides for this calculation

Build context around the numbers with worked examples from our guides.

Contribution Margin Formula: Calculate It, Understand It & Use It →