Log in

View Full Version : Gross profit/contribution margin


help12
Jan 23, 2008, 01:22 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, 02:01 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