Contribution Margin Ratio Template
Contribution Margin Ratio Template
This contribution margin ratio template shows you how to calculate the contribution margin, CM percentage, and break-even point.
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The contribution margin ratio (CM ratio) of a business is equal to its revenue less all variable costs divided by its revenue. It represents the marginal benefit of producing one more unit.
The formula for contribution margin ratio is:
CM ratio = (total revenue – cost of goods sold – any other variable expenses) / total revenue
Break-even Analysis
The contribution margin is not necessarily a good indication of economic benefit. Companies may have significant fixed costs that need to be factored in. It can be important to perform a break-even analysis to determine how many units need to be sold to break even.
In order to perform this analysis, calculate the contribution margin per unit, then divide the fixed costs by this number and you will know how many units you have to sell to break even.
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Additional Resources
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CFI is a global provider of financial modeling courses and of the FMVA Certification. CFI’s mission is to help all professionals improve their technical skills. If you are a student or looking for a career change, the CFI website has many free resources to help you jumpstart your Career in Finance. If you are seeking to improve your technical skills, check out some of our most popular courses. Below are some additional resources for you to further explore:
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In order to become a great financial analyst, here are some more questions and answers for you to discover:
- What is Financial Modeling?
- How Do You Build a DCF Model?
- What is Sensitivity Analysis?
- How Do You Value a Business?
Excel Tutorial
CFI is a global provider of financial modeling courses and of the FMVA Certification. CFI’s mission is to help all professionals improve their technical skills. If you are a student or looking for a career change, the CFI website has many free resources to help you jumpstart your Career in Finance. If you are seeking to improve your technical skills, check out some of our most popular courses. Below are some additional resources for you to further explore:
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