## What Is Contribution Margin?

The Contribution Margin shows the difference between the total sales and the total direct variable costs.

The mathematical expression of the **Contribution Margin** for per unit product is:

The general expression to determine the **Contribution Margin** for an entire batch is:

There is another formula to calculate the value of the **Contribution Margin**:

Consider the dataset below. It showcases the total number of sold products and different types of variable costs.

- Use
**the SUM function**in**C12**to sum the variable costs. - Press
**Enter**.

`=SUM(C8:C11)`

### Example 1 – Calculate the Contribution Margin per Unit

**Steps:**

- Name
**B14**as**Total Variable Cost per Unit**.

- In
**C14**, enter the following formula:

`=C12/C5`

- Press
**Enter**.

You will get the amount of the total variable cost per unit.

- Name
**B15**as Contribution Margin per Unit.

- Enter the following formula in
**C15**.

`=C7-C14`

- Press
**Enter**.

You will get the value of the **Contribution Margin** per unit.

### Example 2 – Calculate the Contribution Margin for an Entire Batch

**Steps:**

- Name
**B14**as**Total Sales**.

- In
**C14**, use the following formula:

`=C5*C7`

- Press
**Enter**.

You will get the value of total sales.

- Name
**B15**as**Total Contribution Margin**and enter the following formula in**C15**.

`=C14-C12`

- Press
**Enter**.

You will get the value of the **Contribution Margin** for an entire batch of products.

**Alternative Method to Calculate the Total Contribution Margin**

**Steps:**

- To calculate the
**Total Variable Cost per Unit**, enter the following formula in**C14**,

`=C12/C5`

- Press
**Enter**.

- To calculate the
**Contribution Margin per Unit**, use the following formula in**C15**.

`=C7-C14`

- Press
**Enter**.

- To determine the value of the
**Total Contribution Margin**, enter the following formula in**C16**.

`=C5*C15`

- Press
**Enter**.

You will get the value of the Total Contribution Margin for an entire batch of products.

## How to Calculate the Contribution Margin Ratio

**Â What Is the Contribution Margin Ratio?**

The Contribution Margin Ratio is the ratio of the difference between total sales and total variable costs and the value of total sales. The mathematical expression of the Contribution Margin Ratio is:

**Steps:**

- To calculate the value of
**Total Sales**, enter the following formula in**C14**.

`=C5*C7`

- Press
**Enter**.

- To calculate the
**Contribution Margin Ratio**, use the following formula in**C15**.

`=(C14-C12)/C14`

- Press
**Enter**.

- Set the cell format as
**Percentage**in**Number**(**Home**tab).

- You will get the value of the
**Contribution Margin****Ratio**.

**Download Practice Workbook**

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Hello,

You made an error in the calculation by including the 1 unit cost of $30 in the sum. Only cell rows of 8-11 equals the total variable cost for 500 units sold. The $30 per unit is only a factor in the Total Sales figures used to calculate the final ratio.

Hello

KURTThank you for reading our article and providing helpful input. We sincerely appreciate your time and effort in reviewing the content and pointing out the calculation error.

We have already taken corrective action and have updated the article accordingly. Thank you one more. Best wishes!

Regards

Lutfor Rahman ShimantoExcelDemy