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Variable cost ratio = total variable cost / sales. As long as price and variable cost remain the same, these ratios will remain the same. It does not matter if the company sells 10 units or 1 million units, the percentage of each sale that becomes contribution margin or does to cover variable costs is the same.angout Limited, LLC sells one product priced at $40 per unit. The variable costs (direct materials, direct labor, variable overhead and variable selling) is $25 per unit. Calculate the contribution margin per unit, the contribution margin ratio and the variable cost ratio.
Formula or equation of CM ratio is as follows: [ CM Ratio = Contribution Margin / Sales ]. (Above can be modified as contribution margin percentage formula ,incremental contribution margin formula, average CPR formula, cvp formula, unit or segment break even point.This ratio is extensively used in cost volume profit calculations.he contribution margin as a percentage of total sales is referred to as contribution margin ratio (CM Ratio).