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-   -   Gross profit/contribution margin (https://www.askmehelpdesk.com/showthread.php?t=175792)

  • Jan 23, 2008, 01:22 PM
    help12
    Gross profit/contribution margin
    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,
  • Jan 23, 2008, 02:01 PM
    dorsetbill
    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

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