How to use contribution margin calculator:
Following is a list of inputs that you must provide to use contribution margin (CM) calculator.
Selling price per units:
The price at which a business offers its product for sale in the normal course of business. It is not subject to any discount offered on bulk orders etc.
Variable cost of goods sold (COGS) per unit:
It includes all variable expenses incurred to manufacture a product i.,e, direct materials (including transportation, loading and unloading), direct labor and variable portion of manufacturing expenses. For merchandising companies, it includes cost of merchandise sold and the related expenses incurred to get the goods ready for sale such as freight in, wages for loading and unloading the goods.
Variable non-manufacturing expenses:
These include variable expenses incurred on marketing and selling activities. Any expense that is variable in nature but does not fall under marketing and selling expenses should also be included in variable non-manufacturing expenses while using above calculator.
Actual or projected units sold:
Contribution margin is calculated to review either past performance or future profitability forecasting. If company is going to evaluate its past performance, this field should be filled with actual units sold for a particular past period. On the other hand, if company is going to look into future, this field should be filled with number of units that company hopes to sell during a particular future period.
Outputs to be generated:
Following is a list of outputs that CM calculator will generate for you.
Contribution margin per unit:
It is the contribution margin that company earns for every single unit that is sold at a particular selling price.
Total contribution margin:
It is the contribution margin that company generates on total units sold for a particular past or projected period.
Contribution margin ratio:
The ratio of contribution margin to sales revenue. It can be computed by either dividing contribution margin per unit by the sales revenue per unit or total contribution margin by total sales revenue for a specific period.
Contribution margin as a percentage of sales revenue:
Contribution margin ratio when expressed in percentage is known as contribution margin percentage. It tells us what percentage the contribution margin of sales revenue is.
Total sales revenue:
It is total actual or projected sales revenue for a particular period of time.
Variable cost per unit:
Total of per unit variable manufacturing and non-manufacturing costs.
Total variable cost:
Total variable cost (both cost of goods sold and non-manufacturing expenses) incurred to generate total sales revenue for past or future period.