Costing
Contribution margin
The share of the price left after variable cost. Multiply by a hundred for a percentage.
The Formula
CM = (P - V) / P
The share of the price left after variable cost. Multiply by a hundred for a percentage.
| Symbol | Meaning | Unit | Notes |
|---|---|---|---|
| CM | Contribution margin | ratio | Contribution as a share of price. |
| P | Price | currency | Selling price per unit. |
| V | Variable cost | currency | Cost that exists only because the unit was made. |
What Each Symbol Means
CMratio
Contribution margin
Contribution as a share of price.
Pcurrency
Price
Selling price per unit.
Vcurrency
Variable cost
Cost that exists only because the unit was made.
See It Worked With Real Numbers
A formula on its own does not tell you which number goes where. The how to calculate contribution margin page applies this equation to a concrete case, shows every intermediate step, and names the mistakes that produce a wrong answer even when the algebra is right.
Where This Formula Appears
This equation is the working core of How To Calculate Contribution Margin, filed under Business. Every number the guide produces comes from substituting into this one line.