Contribution Margin Simulator

Analyze unit economics at scale. Calculate how much each sale contributes to covering fixed costs and generating profit.

Per Unit Data

Selling Price ($)

Variable Cost ($)

Contribution / Unit$40.00

Business Totals

Sales Volume (Units)

Fixed Costs ($)

P&L Waterfall

Net Operating Income

+$20,000

Profit Architecture

Contribution Ratio: 40.0%

Unit Economics

You make $40.00 on every single sale to pay the bills.

Coverage

You need to sell 500 units just to pay your fixed costs ($20,000).

Net Impact

At 1000 units, you generate $20,000 in operating profit.

Execution Steps

Enter 'Price per Unit' and 'Variable Cost per Unit'.

Set your estimated 'Sales Volume' and 'Total Fixed Costs'.

The waterfall chart visualizes how Revenue gets stripped down to Net Income.

Use the Contribution Ratio to understand your operating leverage.

Pro Strategy

If Contribution Margin is negative, stop selling the product immediately. You lose money on every unit.
If you have high fixed costs but high contribution margin (SaaS), focus aggressively on volume.
If you have low contribution margin (Grocery), you must keep fixed costs extremely low to survive.

Core Concepts

Contribution Margin

Price - Variable Cost. This represents the incremental money generated for each unit sold after deducting the variable costs associated with producing it.

Operating Leverage

High contribution margin means high operating leverage. Once fixed costs are covered, profits skyrocket with each additional sale (e.g. Software).

Break-Even Point

The volume of sales where Total Contribution Margin equals Total Fixed Costs.

Deep Dive

What is Contribution Margin Simulator?

This simulator uses Cost-Volume-Profit (CVP) analysis. It separates costs into fixed and variable components to highlight the relationship between volume and profit. It visualizes the flow of money from Top Line (Revenue) to Bottom Line (Net Income).

Best For

• Deciding whether to accept a special order at a lower price.
• Analyzing the profitability of a specific product line.
• Planning for scale (will higher volume actually help?).

Limitations

• Assumes linear costs (no volume discounts or step-fixed costs).
• Assumes constant sales mix if applying to multiple products.

Alternative Methods

Break-Even Analysis

Specifically focuses on finding the zero-profit volume.

Profit Leverage

Focuses on the impact of price changes rather than volume changes.

Industry Applications

See how this methodology generates real revenue uplift in different sectors.

Software

SaaS Startup

Challenge

High burn rate, unsure if business model worked.

Solution

Calculated CM. Price $50, Variable Cost $5 (Server/Support). CM = $45 (90%).

High CM meant the model was sound; they just needed more volume to cover the $50k fixed monthly burn.

Manufacturing

Custom Furniture