Contribution Margin Calculator

Formula

The formula to calculate the contribution margin is:

\[ CM = (SP \cdot N) - (VC \cdot N) \]

Where:

$ CM $ is the Contribution Margin ($)
$ SP $ is the Selling Price per Unit ($)
$ N $ is the Number of Units Sold
$ VC $ is the Variable Cost per Unit ($)

What is Contribution Margin?

A contribution margin is defined as the difference between the revenue generated by an item and its associated variable costs. It helps in understanding how much of the revenue contributes to covering the fixed costs and generating profit.

Example Calculation

Let's assume the following values:

Selling Price per Unit (SP): $50
Number of Units Sold (N): 100
Variable Cost per Unit (VC): $30

Using the formula to calculate the contribution margin:

\[ CM = (50 \times 100) - (30 \times 100) = 2000 \text{ $} \]

The contribution margin is $2000.