### How to Use Contribution Margin Calculator

Enter the Price.

Enter the total fixed cost.

Press Calculate

# Contribution Margin Calculator

### How to calculate Contribution margin

###### Contribution Margin Formula: Price - Variables Cost
Let's say we have a company that sells a new mobile phone, its sales are \$500,000 and the variable costs are \$300,000. The contribution margin for this is \$200,000,

\$200,000 is the money left to pay for fixed costs. It is also possible to calculate contribution margin per product, to do this divide the number of products sold by \$500,000. The company sold a thousand phones, therefore, the contribution margin per product is 500,000 / 1000 = 50.
 Price Variable Cost Contribution Margin Price Variable Cost Contribution Margin 40479 5992 34,487 87701 6860 34,487 82681 5885 76,796 10494 7354 76,796 56937 7772 49,165 36857 5643 49,165 71693 7874 63,819 55661 5415 63,819 46340 7021 39,319 67977 5417 39,319 95976 5761 90,215 26357 5779 90,215

Definition: Contribution margin is defined as the selling price of a product or a service minus the variable cost, it helps a company determine the profitability of a product.

Once we have the variable cost we deduct it from the price, variable cost can be many things, it may be materials, overhead, labor anything associated with the output. It all falls under variable cost, we also have a Average Variable cost Calculator which goes over variable costs.

### Benifits of using contribution margin

Contribution margin is essentially used to determine how profitable a product is. It makes it easier for companies to make decisions related to products, such as pricing of a product or if a product should be discontinued etc. An example would be the break-even point of sales. If the contribution margin is \$1 per product sold and the fixed costs amount's to \$500, the company will have to sell 500 products to break even. We also have a Averavge Fixed Cost Calculator which will go through fixed costs.