Contribution Margin Calculator (Break-Even Point)
Contribution margin is the selling price minus variable costs per unit; the ratio is that margin divided by the price. A product sold for 50 with 30 of variable costs contributes 20 a unit, a 40% ratio. With 12,000 of fixed costs you break even at 600 units, or 30,000 in sales.
Enter the price and variable costs of one unit, in any currency. Add commissions and payment fees as a percentage of the price, then fixed costs and units sold to get the break-even point, operating profit, margin of safety and the sales you need for a target profit.
Contribution margin formulas
| Figure | Formula |
|---|---|
| Contribution margin per unit | price − variable cost |
| Contribution margin ratio | margin ÷ price × 100 |
| Break-even units | fixed costs ÷ margin per unit |
| Break-even revenue | fixed costs ÷ ratio |
| Units for a target profit | (fixed + target) ÷ margin |
Example
A product sells for 50.00 and costs 30.00 a unit in materials, packaging and shipping, so it contributes 20.00, a 40% ratio. Fixed costs are 12,000.00 a month: break-even is 12,000 ÷ 20 = 600 units, or 30,000.00 of sales. Selling 1,000 units contributes 20,000.00 and leaves 8,000.00 of operating profit, with a margin of safety of 400 units. To earn 5,000.00, sell 850 units.
How to raise your contribution margin
Raise the price where customers accept it, buy materials and shipping in larger lots, and cut per-sale fees by moving buyers to cheaper payment methods. A higher contribution margin lowers the break-even point, so every unit after it adds more profit.
Frequently asked questions
How do you calculate contribution margin?
Subtract the variable cost of one unit from its selling price. A product sold for 50 with 30 of variable costs has a contribution margin of 20 per unit: that 20 goes first to cover fixed costs and, once they are covered, becomes profit.
What is the contribution margin ratio?
It is the contribution margin divided by the selling price, times 100. A contribution margin of 20 on a price of 50 is a 40% ratio, so every 100 of sales contributes 40 toward fixed costs and profit. Multiply revenue by the ratio to get total contribution margin.
How do I find the break-even point with contribution margin?
Divide fixed costs by the contribution margin per unit for break-even units, or by the contribution margin ratio for break-even revenue. With 12,000 of fixed costs and 20 a unit, you break even at 600 units, which is 30,000 of sales at 50 each.
Which costs are variable costs?
Costs that rise with every unit sold: materials or the purchase price, packaging, shipping to the customer, sales commission and card or marketplace fees. Rent, salaries and software subscriptions stay the same whatever you sell, so they are fixed costs.
What is the difference between contribution margin and gross margin?
Gross margin subtracts only the cost of goods sold from revenue. Contribution margin subtracts all variable costs, including commissions, payment fees and delivery, and leaves out fixed production overheads. It is the better measure for pricing and break-even decisions.
What is the margin of safety?
It is how far sales can fall before you reach break-even. Selling 1,000 units with a break-even point of 600 gives a margin of safety of 400 units, or 40% of sales. The calculator shows it when you enter units sold and fixed costs.
Related tools: break-even analysis calculator, gross profit calculator, margin calculator, Stripe fee calculator. More on sales and running a sales team on the SalesBond blog and the home page.
Official sources
- OpenStax, Principles of Accounting Vol. 2: Managerial Accounting, 3.1 — contribution margin per unit, contribution margin ratio and total contribution margin.
- OpenStax, Principles of Accounting Vol. 2: Managerial Accounting, 3.2 — break-even point in units and in sales.
Updated on Nov 5, 2026. This calculator is for information only and is not tax, legal or payroll advice. Results come from the formulas above for a single product or an average unit; for a product mix, use a weighted average contribution margin.
