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Contribution Margin Ratio | Contribution Margin Formula. The contribution margin ratio is the difference between a company's sales and variable expenses, expressed as a percentage. The total margin generated by an entity represents the total earnings available to pay for fixed expenses and generate a profit.o calculate the contribution margin ratio, divide the contribution margin by sales. The contribution margin is calculated by subtracting all variable costs from sales.
Contribution margin can be determined at the unit level, as well. Doing so tells you how much each individual unit contributes toward fixed costs and profit, which is a more useful figure for production planning. To get the per-unit margin, divide the product's total contribution margin by the number of units produced. Say you have a total margin of $15,000 and you cranked out 12,000 units. Your per-unit contribution margin is $1.25.