Contribution Margin Calculator

Any cost that scales one-for-one with each sale: product cost, inbound freight allocated per unit, outbound shipping, payment processing, marketplace fees, packaging, and per-order ad spend if you buy customers transactionally. Rent, salaries, and software subscriptions are fixed — they belong in break-even math, not here. The test: if you sell one more unit, does this cost go up?

Gross margin subtracts only cost of goods sold; contribution margin subtracts every variable cost, including shipping, fees and per-order marketing. A product can show a 55% gross margin and only a 20% contribution margin once $8 of shipping and $12 of ad spend join the bill. Contribution margin is the stricter and more decision-ready of the two.

Many operators target a contribution ratio of 25–40% after all variable costs including marketing. Below roughly 15%, fixed costs need enormous volume to cover, and one supplier price increase or shipping surcharge can flip units negative. Products with persistently negative contribution margin lose money on every sale — volume makes that worse, not better.

Three ways: break-even (fixed costs ÷ contribution per unit = units needed), ad limits (contribution before marketing is the most you can pay to win an order and break even), and product ranking (sort your catalog by contribution dollars, not revenue — the promotion, bundling and inventory priorities that fall out are often surprising).

The contribution margin ratio is contribution margin expressed as a percentage of price: contribution margin ÷ selling price × 100. The $24 contribution on a $60 product is a 40% contribution margin ratio. The ratio is what you compare across products at different prices — a $24 contribution is strong on a $60 item and thin on a $600 one. This calculator returns both the dollar contribution and the ratio from the same inputs.