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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.
Total contribution margin measures the amount of contribution margin earned by the company as a whole. To determine overall profitability, compare total contribution margin to fixed costs. Net income equals the excess of contribution margin over fixed costs.