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    help12 Posts: 1, Reputation: 1
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    #1

    Jan 23, 2008, 01:22 PM
    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,
    dorsetbill's Avatar
    dorsetbill Posts: 15, Reputation: 1
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    #2

    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
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