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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.
In CVP analysis, the contribution margin is the dollar amount remaining after deducting variable expenses from sales revenue. The unit contribution margin is the amount that each unit of sold product contributes. In this example, the unit contribution margin is $50 (price of $100 minus variable cost of $50).