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How to calculate Contribution margin ratio

The Contribution margin ratio formula, with plain worked examples you can check yourself.

Contribution margin ratio = (P − V) ÷ P × 100

The result is a percentage (%).

Worked examples

P = 20 · V = 8Contribution margin ratio = 60%
P = 40 · V = 24Contribution margin ratio = 40%
P = 90 · V = 27Contribution margin ratio = 70%

How to use it

  1. Write down the values for each letter in the formula.
  2. Do the brackets first, then divide or multiply.
  3. Multiply by 100 to show the answer as a percentage.
  4. Compare the answer with last period or with a competitor to see if it is good or bad.

This formula belongs to Costs & Break-even.

Related terms

Fixed costsVariable costsCost of goods soldOverheadDepreciationDirect costs

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