The correct formula to calculate the contribution margin ratio is: Unit Contribution Margin / Sales.
The contribution margin ratio represents the percentage of sales revenue that exceeds total variable costs. It shows how much money is available to cover fixed costs and contribute to profit. To calculate it, you take the unit contribution margin—essentially the selling price per unit minus variable costs per unit—and divide this figure by the total sales revenue. Understanding this ratio can help businesses assess how well they are covering their fixed costs and achieving profitability.