Contribution Margin Calculator
From revenue and variable costs, compute the contribution margin and the contribution margin ratio.
Input Data
Results
At a glance:Contribution margin = revenue - variable cost; ratio = margin / revenue x 100%. It shows how much each revenue dollar covers fixed costs and profit. Example: revenue 100k, variable cost 60k → margin 40k, ratio 40% — use it to cover fixed costs, then profit. Unlike gross margin (deducts COGS), contribution margin deducts all variable costs (including variable selling/admin). WARNING: Correct variable/fixed split is essential; classification changes the result. Education, not advice.
Formula
Contribution margin = revenue − variable cost.
Contribution margin % = margin / revenue × 100%.
$$\text{Contribution Margin} = \text{Revenue} - \text{Variable Cost}$$$$\text{CM \%} = \dfrac{\text{Contribution Margin}}{\text{Revenue}} \times 100\%$$How to Use
- Enter the revenue for the period or batch.
- Enter the total variable costs.
- View the contribution margin and ratio.
FAQ
What is the difference between contribution margin and gross margin?
Gross margin deducts COGS (which may include some fixed production cost like depreciation). Contribution margin deducts ALL variable costs (materials, piece-rate labour, commissions) and leaves every fixed cost to be covered by the margin. Gross margin is for financial reporting; contribution margin is for cost-behaviour and break-even decisions.
What is the contribution margin ratio used for?
It tells how much of each revenue dollar covers fixed costs and profit. Higher is safer. It is also the key to break-even: break-even revenue = fixed costs / contribution margin ratio.
What does a negative contribution margin mean?
Variable cost exceeds revenue — every sale loses money before fixed costs. Re-examine pricing or cost structure immediately; continuing only enlarges the loss.
How do I distinguish variable from fixed costs?
Variable costs move with output (materials, piece wages, commissions, packaging, usage-based utilities). Fixed costs stay roughly constant in the period (rent, salaried payroll, depreciation, insurance). Some are mixed and must be split; classification is relative to the period and capacity range.
How does this relate to Hong Kong SMEs?
For HK shops, F&B and studios, the contribution margin ratio drives break-even and pricing decisions (e.g. a studio with HK$60k fixed cost and 40% ratio needs HK$150k revenue to break even). Pair with the break-even and gross-margin calculators; the HKTDC and HKPC offer SME support. Education, not advice.
Related Tools
References
Content review: Calculatorism Finance Team. Results are for reference only; please refer to the relevant authorities for the official figures.