Every product has a variable cost/ manufacturing costs and a selling price/ money generated for making said product. If we deduct that variable cost from income generated on a per unit basis then the money that remains is called the contribution margin. The calculator that calculates this margin is known as the contribution margin per unit calculator.
What Is Contribution Margin per Unit Calculator Used for?
A contribution margin per unit calculator is a helpful device for a conglomerate to a store manager. It can help make or break a company. It is useful in:
- Creating break-even analysis. We can decide the overall cost and sales price.
- Knowing the safety margin on which to run a company.
- Fixing products’ selling price. So that the cost of manufacturing them will lead to profit.
- Generating substantial profit for organizational growth.
- It can help to separate fixed costs and profits from sales.
- Fixing the range of sales commissions and other commissions.
Formula: How To Find Contribution Margin Per Unit?
Are you want to manually calculate the contribution margin per unit? You can manually do it, which that our calculator calculate it by programmatic function.
The Formula of Contribution Margin per unit:
Contribution Margin = (Selling Price per Unit x Number of Units) - (Variable price per Unit x Number of Units)
Suppose selling price per unit = 55, number of units = 25, variable price per unit = 10, number of units = 25.
Now see how can you find out the result by manually.
Contribution Margin = ( 55 x 25) – (10 x 25)
= 1375 – 250
So, your contribution margin = 1125
Formula: How To Get The Contribution Margin Ratio Percentage:
You can get the contribution margin ratio percentage manually Contribution Margin divided by Selling Price per Unit into Number of Units.
The exact formula is:
Contribution Margin Ratio = Contribution Margin ÷ (Selling Price per Unit x Number of Units) x 100%
= 1125 ÷ (55 x 25) x 100%
= 1125 ÷ 1375 x 100%
If you looking for without % value then avoid x 100% for multiply.
Formula: How To Calculate Contribution Margin Ratio In Excel?
If you want to calculate the contribution margin ratio in excel by it’s formula then follow the below process.
At first design a sheet like the below table.
|1||Per Unit Sales price:|
|2||Variable cost per Unit:|
|3||Number of Unit:|
|5||Contribution margin:||=B1 * B3 – B2 * B3|
|6||Contribution margin ratio:||=B5/(B1*B3)|
Contribution margin 3 formula for excel:
Contribution margin: =B1 * B3 - B2 * B3
Contribution margin ratio: =B5/(B1*B3)
Profit generated: =B5-B4
You can also follow the screenshot.
Contribution Margin Ratio is Equal to What?
Contribution margin ratio is equal to= (Selling Price per Unit multiply Number of Units) minus (Variable price per Unit multiply Number of Units)