Business & Commerce
Intermediate

Contribution Margin Ratio

Contribution margin expressed as a fraction of the selling price.

Formula

CMR=Price−Variable CostPriceCMR = \dfrac{Price - Variable\ Cost}{Price}

Variables

CMRContribution margin ratio
PriceSelling price
Variable CostPer-unit variable cost

Example

($50 − $30)/$50 = 40%

Did You Know?

The CMR tells you how much of each sales dollar is available to cover fixed costs.

contributionratiocosting