Contribution margin for one product
Find price and unit costs on the Production and Marketing pages of your decision screen. Labour and material cost per unit are shown on the Production spreadsheet.
How many units must this product sell to break even?
Fixed costs are the period costs attributable to this product — R&D, promotion, sales budget and its share of depreciation and admin.
What has to change to reach the margin I want?
Enter where you are and where you want to be. The calculator solves for the price rise, the labour cut and the material cut that would each get you there on their own.
Compare every product in your portfolio
Enter each product and see which ones are carrying the company and which are quietly destroying margin.
How to Use the Capsim Contribution Margin Calculator
Contribution margin is the number Capsim instructors check first, because it exposes whether your pricing and your production decisions were made by people who spoke to each other. It is also scored directly on the Balanced Scorecard, and it sets the ceiling on every profit figure below it.
Where to find the inputs
- Price — your Marketing decision for that product, in the current round.
- Direct labour per unit — the Production spreadsheet. It falls as you raise automation and rises when you run a second shift.
- Direct material per unit — also on Production. It is driven by your product's positioning and MTBF specification, so a cutting-edge High End product costs more to build than an ageing Low End one.
- Inventory carrying cost per unit — divide total inventory carry from the income statement by units produced. Anything above about 3% of sales means you are overproducing.
The formulas
- Contribution Margin per Unit = Price − Variable Cost per Unit
- CM Ratio = Contribution Margin per Unit ÷ Price
- Breakeven Units = Fixed Costs ÷ Contribution Margin per Unit
- Margin of Safety = (Expected Units − Breakeven Units) ÷ Expected Units
What Contribution Margin Should You Be Aiming For?
Capsim's own guidance puts a healthy contribution margin above 30%. Competitive teams run mid-to-high 30s by round four, and the strongest products in High End and Performance segments can pass 45%.
| CM Ratio | Reading | Usual cause |
|---|---|---|
| Below 25% | Losing money on volume | Price at the bottom of the range, low automation, or heavy overproduction |
| 25–30% | Thin but survivable | Acceptable for Low End; a problem anywhere else |
| 30–38% | Competitive | The band most well-run teams sit in from round three |
| 38%+ | Strong | High automation plus accurate positioning plus disciplined production |
The automation trade-off
Raising automation is the most reliable way to lift contribution margin, because it cuts direct labour cost per unit permanently. The catch is that high automation makes repositioning expensive and slow, so a product you intend to move across the perceptual map each round should not be automated to 9. Low End products, which barely move, should be. The automation payback calculator shows the labour saving at every level and whether it repays in time.
Why overproduction quietly destroys margin
Every unit you build but do not sell carries an inventory cost into the next round, and Capsim charges it against contribution margin. Teams that forecast optimistically pay this twice: once in carrying cost, and again when they discount the excess stock in the following round. Tighten the forecast before you touch price — the sales forecast calculator builds the number from segment data rather than from last round's sales.