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help12
Jan 23, 2008, 12:22 PM
What's the importance of both gross profit and contribution margin to a business? Is there a diffence between the two? Please explain as if I am 5yr old. Thanks,
dorsetbill
Jan 23, 2008, 01:01 PM
Take a restaurant meal for example:-

Gross profit margin=price charged for meal by operator less cost of meal ingredients

Profit contribution=that gross profit less (ordinarily) direct overheads such as wages,
rent,business rates etc

A business with more than one "outlet" would then have two or more "outlets"
contributing towards the admin overheads (and hopefully) overall profit for the owner