How to Calculate Contribution Margin Per Unit and in Total

Accounting Help!

Here is a simple way to calculate contribution margin for accounting in total or per unit.

Instructions

1. 

   Knowing the Format

   The format used to calculate contribution margin is all sales - all things variable. (When learning accounting, your variable costs is usually labeled direct labor and direct materials)

   Sales - (direct labor + direct materials) = Contribution margin

2. 

   Calculating Contribution Margin in Total

   Total Sales ($10/unit x 100 units).............$1,000
   -
   All things variable
   Direct Labor ($3/unit 100)...........................$300
   Direct Materials ($1/unit x 100).................$100
   Contribution Margin..........................................$600

3. 

   Calculating Contributing Margin Per Unit

   Because variable expenses stay the same per unit, you can calculate the total contribution margin per unit and then multiply your contribution margin per unit by the total amount of units sold to get your total contribution margin.

   Total Sales ($10/unit)...........................$10
   -
   All things variable
   Direct Labor ($3/unit)............................$3
   Direct Materials ($1/unit)....................$1
   Contribution Margin Per Unit..................$6

   Contribution Margin Per Unit x Units Sold = Contribution Margin in Total

   $6.00 x 100 units = $600 Contribution Margin in Total