Enter the unit revenue ($) and the variable costs ($) into the Variable Margin Calculator. The calculator will evaluate and display the Variable Margin. 

Variable Margin Formula

The following formula is used to calculate the Variable Margin. 

VM = (UR - VC) / UR * 100
  • Where VM is the Variable Margin (%)
  • UR is the unit revenue ($) 
  • VC is the variable costs ($) 

How to Calculate Variable Margin?

The following example problems outline how to calculate Variable Margin.

Example Problem #1:

  1. First, determine the unit revenue ($).
    • The unit revenue ($) is given as: 147.
  2. Next, determine the variable costs ($).
    • The variable costs ($) is provided as: 30.
  3. Finally, calculate the Variable Margin using the equation above: 

VM = (UR – VC) / UR * 100

The values given above are inserted into the equation below and the solution is calculated:

VM = (147 – 30) / 147 * 100 = 79.59 (%)

FAQ

What is Variable Margin?

Variable Margin refers to the percentage of unit revenue that exceeds variable costs. It is a financial metric used to assess the profitability of selling a product, calculated by subtracting variable costs from unit revenue, dividing by unit revenue, and then multiplying by 100 to get a percentage.

Why is calculating Variable Margin important?

Calculating Variable Margin is crucial for businesses to understand how much of the revenue generated from sales is retained after covering variable costs. It helps in making pricing, production, and sales strategies, ensuring that the business remains profitable.

Can Variable Margin change over time?

Yes, Variable Margin can change over time due to fluctuations in unit revenue or variable costs. Changes in production efficiency, cost of materials, or selling price can all affect the Variable Margin. Regularly monitoring and analyzing these changes is important for maintaining profitability.