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How to calculate contribution margin?

Contribution margin is calculated as contribution profit divided by revenue. To calculate contribution profit, subtract variable cost of goods sold and variable operating expense. A cost is variable if it fluctuates based on increases or decreases in revenue.

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  • How to calculate gross margin?

    Gross margin is gross profit divided by revenue. You will need to calculate gross profit first, which is revenue less cost of goods sold (step #1 below): Both gross profit ($) and gross margin (%) are used to assess how much money the company makes on each dollar of revenue after factoring in the cost to make a product. Cost of goods sold includes raw materials, direct labor, and manufacturing overhead.