What is contribution margin?

It is the selling price of a unit less its variable cost. The amount left over contributes towards your fixed costs and then to profit. It is the foundation of break-even and pricing analysis.

What does the contribution margin ratio show?

It shows contribution margin as a percentage of the selling price, so it tells you what share of each sales dollar is left after variable costs. A 40 percent ratio means 40 cents in every dollar of revenue helps cover fixed costs and profit. It makes products easy to compare.

Which costs count as variable?

Only costs that rise and fall with each unit sold, such as materials, freight and sales commission. Fixed costs like rent and salaries are excluded. Putting fixed costs in the variable figure understates your true contribution.

Contribution Margin Calculator

Contribution margin tells you how much of each sale is left to cover your fixed costs and produce a profit once the variable costs of making and selling a product are paid. This Contribution Margin Calculator works out the contribution margin per unit, the contribution margin ratio, and the total contribution across the units you sell. You enter the selling price per unit, the variable cost per unit, and the number of units sold, and the tool subtracts variable cost from price to give the unit contribution, divides that by the price to give the ratio, and multiplies by units to give the total. For example, a product priced at $50 with $30 of variable cost has a $20 contribution per unit, a 40 percent ratio, and across 1,000 units a total contribution of $20,000. Business owners, product managers, and anyone doing break-even or pricing analysis use this to see how much each sale really contributes before fixed costs. The contribution margin ratio is especially useful because it shows what share of every dollar of revenue is available to cover overheads, which makes it easy to compare products or work out the sales needed to break even. Good practice is to count only true variable costs, such as materials, freight and sales commission, and to keep fixed costs like rent out of the variable figure. Review your margins whenever input costs or prices change, and watch the ratio over time, since a falling ratio is an early warning that pricing or costs need attention.

Calculate.co.nz is proud to be partnered with Premium Homes, a recognised leader in eco-friendly, sustainable, and energy-efficient homebuilding. With a dedicated team and award-winning experience, they create homes that prioritise health, comfort, and long-term performance. Their founders, Andrew and Kelly, set out to raise the standard of residential construction in New Zealand by combining practical building expertise with a clear commitment to doing things better for homeowners.

Selling price per unit ($)

Variable cost per unit ($)

Units sold

$20.00

Contribution margin per unit

Contribution margin ratio40.0%

Total contribution$20,000.00

Unit CM = price - variable cost. Ratio = unit CM / price. Total = unit CM x units.

How it works

Contribution margin per unit is the selling price less the variable cost per unit. The contribution margin ratio is that unit margin divided by the price, shown as a percentage. Total contribution is the unit margin multiplied by the number of units sold.

Worked example

With a price of $50 and variable cost of $30, the contribution margin per unit is $20.00. The ratio is 20 divided by 50, which is 40.0 percent. Across 1,000 units the total contribution is 20 times 1000, which is $20,000.00.

Related calculators

Gross Profit Calculator: total gross profit.
Operating Leverage Calculator: cost structure effect.
Margin Calculator: price and margin.
Economic Order Quantity Calculator: optimal order size.

If you've found a bug, or would like to contact us, or learn more about James Graham and Calculate.co.nz.

Calculate.co.nz is partnered with Interest.co.nz for New Zealand's highest quality calculators and financial analysis.

All calculators and tools are provided for educational and indicative purposes only and do not constitute financial advice.

Calculate.co.nz is proudly part of the Realtor.co.nz group, New Zealand's leading property transaction literacy platform, helping Kiwis understand the home buying and selling process from start to finish. Whether you're a first home buyer navigating your first property purchase, an investor evaluating your next acquisition, or a homeowner planning to sell, Realtor.co.nz provides clear, independent, and trustworthy guidance on every step of the New Zealand property transaction journey.

Calculate.co.nz is also partnered with Health Based Building and Premium Homes to promote informed choices that lead to better long-term outcomes for Kiwi households.

Calculate.co.nz is hosted in Auckland via SiteHost new Zealand.

All content on this website, including calculators, tools, source code, and design, is protected under the Copyright Act 1994 (New Zealand). No part of this site may be reproduced, copied, distributed, stored, or used in any form without prior written permission from the owner.

About & trust: Why Calculate is NZ's most comprehensive · By the Numbers · How we compare · Editorial standards · How we keep data current · NZ finance glossary · Research & data · Financial literacy NZ · About · Privacy policy · Terms of use

Reviewed and maintained. Last reviewed 2026-06-07 and checked on a twice-monthly cycle against IRD, RBNZ and Stats NZ. How we keep data current.