Contribution margin is revenue per unit minus variable cost per unit. Formula: Contribution margin = Price − Variable cost per unit. It's the amount each sale contributes toward covering fixed costs and profit. Used in break-even analysis and product profitability.
Formula
Contribution margin (per unit) = Selling price − Variable cost per unit. Contribution margin % = (Price − Variable cost) ÷ Price. Break-even units = Fixed costs ÷ Contribution margin per unit.
Why it matters
Contribution margin shows how much each unit sold helps cover fixed costs (rent, salaries, etc.) and profit. Products with higher contribution margin contribute more. Use our Break-Even Calculator and Product Profitability Analyzer to apply it. Back to Ecommerce Growth Stages glossary.