Accounting Contribution Margin (Monthly) Calculator
Calculate your monthly contribution margin, contribution margin ratio, operating income and break-even sales from revenue and costs.
Overview
This monthly contribution margin calculator shows how much sales revenue remains after variable costs, how efficiently revenue contributes to fixed costs, and the sales level needed to break even. Enter your monthly revenue, variable costs and fixed costs to estimate the results.
How it works
Contribution margin equals monthly sales revenue minus monthly variable costs. The contribution margin ratio divides that amount by revenue, showing the percentage of every sales dollar available to pay fixed costs and then create profit. Estimated operating income subtracts fixed costs from contribution margin. Break-even sales divide fixed costs by the contribution margin ratio, so they represent the sales needed to produce enough contribution margin to cover fixed costs.
How to use this calculator
- 1Enter your total sales revenue for the month.
- 2Add all costs that vary with the sales you make.
- 3Enter fixed costs for the same month.
- 4Review your contribution margin and contribution margin ratio.
- 5Compare estimated operating income with your business target and break-even sales.
Example Calculation
Monthly sales revenue
$50,000
Monthly variable costs
$30,000
Monthly fixed costs
$15,000
Monthly contribution margin
$20,000
With monthly revenue of 50,000, variable costs of 30,000 and fixed costs of 15,000, contribution margin is 20,000, the contribution margin ratio is 40%, operating income is 5,000, and break-even sales are 37,500.
Frequently asked questions
What is monthly contribution margin?
Monthly contribution margin is the revenue left after subtracting costs that vary with sales during the month. It is used to cover fixed costs and then contribute to profit.
How is the contribution margin ratio calculated?
It is calculated by dividing contribution margin by sales revenue and multiplying by 100. A 40% ratio means 40 cents of every sales dollar remains after variable costs.
Which costs are variable costs?
Common examples include direct materials, sales commissions, payment processing charges, shipping tied to orders and production costs that rise as sales increase.
Which costs are fixed costs?
Fixed costs commonly include rent, insurance, salaried staff, software subscriptions and other costs that usually remain stable over a relevant sales range.
What does break-even sales mean?
Break-even sales are the estimated revenue required for contribution margin to exactly cover fixed costs, leaving no operating profit or loss from the costs included.
Can a contribution margin be negative?
Yes. A negative contribution margin means variable costs exceed revenue, so each additional sale increases the loss before fixed costs are considered.
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Assumptions and warnings
Assumptions
- Results are monthly estimates based on the revenue and costs you enter.
- Variable costs are assumed to change in line with sales revenue.
- Fixed costs are assumed to remain constant within the relevant monthly sales range.
- The break-even sales estimate assumes the current contribution margin ratio continues at higher or lower sales levels.
- Amounts exclude items not entered, such as taxes, interest, depreciation, owner drawings or one-off costs.
Warnings
- This calculator provides an estimate only and is not accounting, tax or financial advice.
- Break-even sales are meaningful only when revenue exceeds variable costs and the contribution margin ratio is positive.