Increase in Contribution Margin Calculator

Formula

The formula to calculate the Increase in Contribution Margin is:

\[ \Delta CM = (CM_{new} \cdot Q_{new}) - (CM_{old} \cdot Q_{old}) \]

Where:

$ \Delta CM $ is the Increase in Contribution Margin
$ CM_{new} $ is the New Contribution Margin per Unit
$ Q_{new} $ is the New Quantity Sold
$ CM_{old} $ is the Old Contribution Margin per Unit
$ Q_{old} $ is the Old Quantity Sold

What is an Increase in Contribution Margin?

An increase in contribution margin refers to the additional profit generated from selling additional units of a product or service. It is calculated by comparing the contribution margins of the new and old quantities sold. The contribution margin is the difference between the selling price per unit and the variable cost per unit. An increase in contribution margin indicates improved profitability and efficiency in generating revenue from sales.

Example Calculation

Let's assume the following values:

New Contribution Margin per Unit (CM_new) = $15
New Quantity Sold (Q_new) = 200
Old Contribution Margin per Unit (CM_old) = $10
Old Quantity Sold (Q_old) = 150

Using the formula:

\[ \Delta CM = (15 \cdot 200) - (10 \cdot 150) = 3000 - 1500 = 1500 \]

The Increase in Contribution Margin (ΔCM) is $1500.