# How to Figure Out the Weighted-Average Contribution Margin

Calculating the contribution margin of a single product is initially a simple process that becomes more complex when you have a mix of products. Calculate the weighted average contribution margin to find your contribution margin for your overall mix of products. This method takes into account the contribution margin and sales volume for each product in your mix.

## Step 1.

Calculate the variable costs per unit by dividing the total variable costs -- which are found on the firm's income statement -- by the number of units produced. For example, if you have variable costs of $10,000 to produce 1,000 units, then the variable cost per unit is $10.

## Step 2.

Calculate the contribution margin per unit of each product by subtracting the variable costs per unit from the unit-selling price -- that is the price you sell a single unit for. For instance, with a variable cost per unit of $10 and a unit-selling price of $20, the contribution margin per unit would be $10.

## Step 3.

Calculate your market share in volume by dividing the number of units that you produce for the market by the number of units produced in the overall market. For example, if you produce 12,000 units per year and the overall market produces 48,000 units annually, you have a 25 percent market share. If the exact market volume is not publicly available, you need to estimate it based on the number of competitors you have and what you estimate their production levels to be.

## Step 4.

Multiply each unit contribution margin by the product's share of sales by volume. For example, if you have a product with a contribution margin of $10 and it has a market share of 25 percent, you would get a weighted contribution margin of $2.50.

## Step 5.

Add up the weighted contribution margins for each product. This will give you the weighted average contribution margin per unit. For example, if in addition to one product having a weighted contribution margin of $2.50, you had another with a weighted contribution margin of $2.00, and another of $3.00, you would add them up to get a weighted average contribution margin of $7.50.