How to calculate contribution margin?

To calculate the contribution margin, we must deduct the variable cost per unit from the price per unit. For instance, in Year 0, we use the following formula to arrive at $60.00 per unit. 3. Contribution Margin Ratio Calculation Example Next, the CM ratio can be calculated by dividing the amount from the prior step by the price per unit.

What is the contribution margin per unit?

Only two more steps remain in our quick exercise, starting with the calculation of the contribution margin per unit – the difference between the selling price per unit and variable cost per unit – which equals $30.00. The $30.00 represents the earnings remaining after deducting variable costs (and is left over to cover fixed costs and more).

How do you calculate a product's contribution margin ratio?

The $30.00 represents the earnings remaining after deducting variable costs (and is left over to cover fixed costs and more). In conclusion, we’ll calculate the product’s contribution margin ratio (%) by dividing its contribution margin per unit by its selling price per unit, which returns a ratio of 0.60, or 60%.