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SALES REVENUE - ( DIRECT MATERIAL+ DIRECT LABOR + VARIABLE FACTORY OVERHEADS) = CONTRIBUTION MARGIN, I.E MARGIN TO MEET THE FIXED EXPENSES
Gross profit (GP) is different from Contribution margin (CM).
GP is the difference between Sales and Cost of Sales under Absorption costing/full costing while CM is the difference between Sales and Variable manufacturing costs under Variable costing. The difference results from different treatment of fixed manufacturing cost under both costing method.
No.
NO The basic difference B/W
G.P = SALES -CGS
CM= REVENUE - V .MANUFACTURING COST
TREATMENT IS DIFFERENT
No....
Both are difference in every sense
If you compare both and make a decision on the basis of it, it will lead to trouble
No Sir GP and CM are totally different.
contribution margin = sales minus variable cost
gross margin = sales - COGS ( both fixed and ( variable )
