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An $8 label at a 40% margin
The carrier charges you $8 to ship the order. Contribution margin, before that shipping cost, is 40%. You also type a $35 order, so the page can show what that order contributes after the label.
Shipping cost you absorb: 25% lower
Change shipping cost you absorb to 6 while keeping the other example values the same.
Shipping cost you absorb: 25% higher
Change shipping cost you absorb to 10 while keeping the other example values the same.
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Quick answer
What does the Free shipping threshold calculate?
What order value covers the shipping cost at this margin? This calculator uses shipping cost you absorb, contribution margin, and order value to test to estimate order size that covers the label immediately in your browser.
With the values currently entered, the result is $20.00 — order value that covers shipping. It also shows contribution on the tested order, left after shipping, and contribution margin.
How to use the Free shipping threshold
- Replace the example values with your own numbers.
- Review the result and supporting figures as they update automatically.
- Check the formula and assumptions before using the estimate for a decision.
Inputs used
- Shipping cost you absorb
- Contribution margin — entered in %
- Order value to test
Free shipping threshold formula
Threshold = shipping cost ÷ (margin percent ÷ 100). Contribution on a tested order = order value × that same ratio.
Assumptions
- SBA defines contribution margin as price minus variable cost, and the ratio as (price − variable cost) ÷ price. This page divides the shipping cost by that ratio.
- Type the margin before the shipping you are about to absorb. If that label is already inside variable cost, the threshold counts it twice. The threshold is a planning order size, not a carrier quote.
Verify the inputs
Authoritative sources
These sources explain the definitions, factors, or rules behind this tool. Their geographic scope is shown because an official source for one country is not automatically valid somewhere else.
Sources do not endorse Calculum. Check the source date, scope, and your own documents before making a financial, tax, insurance, or reporting decision.
Practical guide
Free shipping threshold example and edge cases
A free-shipping offer costs you the label on every order that qualifies. SBA defines contribution margin as price minus variable cost, and the ratio as that gap divided by price. Divide the shipping cost by that ratio and you get the order whose margin covers the label.
Example: An $8 label at a 40% margin
The carrier charges you $8 to ship the order. Contribution margin, before that shipping cost, is 40%. You also type a $35 order, so the page can show what that order contributes after the label.
- Shipping cost you absorb
- 8
- Contribution margin
- 40 %
- Order value to test
- 35
Calculated result$20.00order value that covers shipping
The threshold is $20. A $35 order contributes $14, so $6 remains after the $8 label. An order under $20 contributes less than the label costs.
Example results use the default display profile. The calculator above follows your selected country and units.
How to read the result
- The threshold is the shipping cost divided by the margin ratio. At 40%, each dollar of the order contributes 40 cents toward the label.
- Type the margin before the shipping you absorb. A margin that already includes the label counts that cost twice, and the threshold comes out too high.
Edge cases worth checking
The label is already inside variable cost
SBA’s ratio subtracts variable cost from price. Leave this shipping cost out of that variable cost. Put the label only in the shipping box, and the margin only on the goods.
The margin on the order is zero
A zero margin has nothing to set against the label, so the threshold does not compute. A shipping cost of zero is a threshold of zero, because there is no label to cover.
What changes the result most
Shipping cost you absorb
Use a current amount for shipping cost you absorb. Include fees or recurring costs that belong in the same figure.
Contribution margin
Test a lower and higher contribution margin. A small percentage change can move the final result more than expected.
Order value to test
Use a current amount for order value to test. Include fees or recurring costs that belong in the same figure.
Try a different scenario
Small changes show whether the answer is stable or sensitive.
Shipping cost you absorb: 25% lower
6$15.00order value that covers shipping
Shipping cost you absorb: 25% higher
10$25.00order value that covers shipping
Contribution margin: 25% higher
50 %$16.00order value that covers shipping
Common mistakes
Check shipping cost you absorb
SBA defines contribution margin as price minus variable cost, and the ratio as (price − variable cost) ÷ price. This page divides the shipping cost by that ratio. Make sure this matches the number you enter.
Keep order value to test consistent
Type the margin before the shipping you are about to absorb. If that label is already inside variable cost, the threshold counts it twice. The threshold is a planning order size, not a carrier quote. Use the same units and time period throughout the calculation.
Do not rely on one free shipping threshold scenario
Run a cautious case and an optimistic case. The range is often more useful than one exact-looking number.
Use this result well
What order value covers the shipping cost at this margin?
It does not replace a quote, contract, accountant, or local employment guidance.