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Contribution Margin by Product Worksheet

Contribution margin shows how much each product adds toward fixed cost and profit after variable costs are paid. This worksheet computes margin per unit, total margin and margin percent for each product, so you can see which lines carry the business and which ones only look busy.

Download:
ProductUnits soldNet price per unitVariable cost per unitRevenueMargin per unitContribution marginMargin %
$255,600
$46
$82,800
32.4%
$200,200
$9
$45,240
22.6%
$148,800
$1
$26,400
17.7%
$75,250
$660
$23,100
30.7%
$102,600
$7
$58,500
57%
Total revenue
$782,450
Total contribution margin
$236,040
Blended margin %
30.2%
Total contribution margin divided by total revenue.
Highest margin per unit
$660

Use net price after rebates and discounts, and variable cost that moves with volume: material, direct labor paid by the piece, freight out, commissions and variable overhead. Leave fixed costs such as rent and salaried supervision out of the unit cost.

Product margin report from your ERP

Optional: tell us your ERP and we will describe how to produce this table automatically from invoices and standard costs.

Optional. The tool and every export work without this. No spam.

How to use it

List each product or product family, then enter units sold for the period, the average net selling price and the variable cost per unit. The sheet calculates revenue, margin per unit, total contribution and margin percent for every row, and totals the blended result at the bottom. Replace the sample rows with your own and export to Excel for the monthly pack.

  • Use net price after discounts, rebates and freight allowed.
  • Include material, direct labor that varies with output, packaging and freight out.
  • Exclude depreciation, rent and fixed salaries from variable cost.
  • Group very small items into one family to keep the table readable.

The formula

Contribution margin per unit is price minus variable cost per unit. Total contribution is units multiplied by that margin. Contribution margin ratio is total contribution divided by revenue. Unlike gross margin, it does not include fixed overhead absorbed into the standard cost, so it answers the question of what happens to profit if one more unit is sold or dropped. Fixed costs are then covered by the sum of the contributions, which is the basis of break-even and mix decisions.

Reading the table

Sort mentally by total contribution, not by revenue. A bracket with a low percent but huge volume may give more dollars than a custom fixture with a high percent. Check the blended margin against the level you need to cover fixed costs. If a product has a positive contribution but a negative gross margin under full absorption, dropping it will usually lower profit unless the capacity it uses can be sold at a better margin. Constrained machines make the margin per machine hour a better ranking than margin per unit.

Common mistakes

Using standard cost from the ERP as variable cost mixes in fixed overhead, which understates margin on high-volume items. Using list price rather than net price overstates it. Averaging across products with very different mixes hides the real picture, so keep the unit of analysis at the product or family that you can actually price or cut. Finally, remember the numbers are a snapshot, and a change in mix will shift the blended percent even if no price changes.

Frequently Asked Questions

What is contribution margin?

It is selling price minus variable cost per unit. It shows the amount each unit contributes toward fixed costs and profit. Summed across products it tells you how much revenue is left to cover overhead once the cost of making and selling the goods is paid.

How is it different from gross margin?

Gross margin deducts the full absorbed cost of goods sold, including fixed overhead allocated per unit. Contribution margin deducts only variable cost. It is better for volume, mix and make-or-drop decisions, while gross margin is what appears on the income statement.

Should I drop a product with low margin percent?

Not by percent alone. If the contribution is positive and the capacity would otherwise sit idle, the product still helps cover fixed cost. Drop it when the capacity or sales effort can earn more elsewhere, or when the contribution is negative.

Which costs are variable?

Direct material, piece-rate or output-driven labor, packaging, freight out, sales commissions and the variable part of utilities and tooling. Costs that stay the same across the relevant range, such as rent, insurance and salaried staff, are fixed.

If you want contribution margin by product pulled straight from your ERP sales and cost data, we can set up a read-only report that refreshes monthly.

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