Contribution Margin Calculator

What is contribution margin? Contribution margin is the dollars (or percentage) of each sale you actually keep after subtracting all variable costs — COGS, shipping, payment processing, returns, and ad cost per order. It is more useful than gross margin in ecommerce because it accounts for every cost that scales with each additional order, not just product cost. It is the single most important number in your ecommerce P&L because it tells you how much money you actually keep on every order. Gross margin only subtracts COGS from revenue. Contribution margin goes further — it subtracts shipping costs, payment processing fees (typically 2.9% plus $0.30 on Shopify Payments or Stripe), advertising cost per order, and the economic impact of returns.

The difference is usually shocking. A brand reporting 65% gross margins might discover their contribution margin is actually 22% once they factor in $6 shipping, 2.9% processing, $15 in ad cost per order, and an 8% return rate. That means only $14.30 of a $65 order is actual profit — and that is before fixed costs like rent, salaries, and software.

This calculator breaks down every variable cost as both a dollar amount and a percentage of your selling price, making it easy to see which costs are eating the most margin. For most DTC brands, ad cost per order and COGS are the two largest line items. Reducing either by even a few dollars can have a dramatic impact on profitability at scale.

If you sell 10,000 units per month and improve contribution margin by $2 per order, that is $20,000 in additional monthly profit. Use this number to set your breakeven ROAS, evaluate product viability, and make informed decisions about pricing and promotions.