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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.
The first variable you need to find for the contribution margin equation is its unit revenue â in other words, the price it's sold for. The confusing term unit revenue is used in economics because the product's price is equal to the revenue generated by the sale of a single product (or one unit).ontribution margin is a concept often used in a branch of managerial accounting known as cost-volume-profit (CVP) analysis. A single product's contribution margin is given with the formula P-V, where P is the cost of the product and V is its variable cost.