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What is the difference between Gross Margin and Contribution Margin ?

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Question ajoutée par Ahmed Shaaban , Finance Manager , BOD Secretary , Al-Murjan Group Holding Company
Date de publication: 2015/11/11
Danish Syed
par Danish Syed , Branch Manager , Student Biryani / Café Student Karachi

Gross Profit

(Sales minus Cost of Goods Sold. The Cost of Goods Sold consists of the fixed and variable product costs, but it excludes all of the selling and administrative expenses).

 

Contribution Margin

(Net Sales minus the variable product costs and the variable period expenses).

Mudasser Siddique
par Mudasser Siddique , Finance Business Partner (FP&A B2B) , the ENTERTAINER

Gross Profit is also known as Gross Margin.

 

The essential difference between the contribution margin and gross margin is that of fixed overhead costs that are not included in the contribution margin. This means that the contribution margin is always higher than the gross margin. contribution margin is used to take one-off decisions.

Arif Pathan
par Arif Pathan , Financial Analyst , TGS Koya Chartered Accountants

Gross margin demonstrate the value of profit gained from direct activity against the turnover instead of GP margin contribution margin shows the individual product's profitable (Product revenue-variable cost).

Arun nair Arun
par Arun nair Arun , Accountant , Alfanar Travel W.L.L

Gross profit margin: (Sales- COGS)/Sales

contribution margin: Net sales - variable cost

Malik Saleem Iqbal
par Malik Saleem Iqbal , Assistant Finance Manager , Ali Zaid Al-Quraishi & Brothers Co LTD

Difference between contribution margin and gross margin with the following Example:-

Company had Net Sales of, during the past year. Its inventory of goods was the same quantity at the beginning and at the end of year. Its COGS consisted of, of variable costs and, of fixed costs. Its selling and administrative expenses were, of variable and, of fixed expenses.

Contribution Margin

Net Sales (,) – {(Variable Product Cost,) + (Variable Expense,)}  =,/-

 

Gross Margin

Net Sales (,) –  {(COGS Variable,)+(COGS Fixed,)} =,/-

El-hussien Mohammed Mahmoud El-shafey
par El-hussien Mohammed Mahmoud El-shafey , Chief Accountant , Saudi Staffing Company (TAHEED)

gross margin the result from used Absorption costing concept it mean sales price minus{(sales) - (beginning inventory + variable costs and fixed costs manufacturing - ending inventory).

while contribution margin is result from used variable costing concept  it mean sales price minus {(sales) - (beginning inventory + variable costs costs manufacturing + variable sales and Administrative expenses - ending inventory)}.

Dheeraj Jangda
par Dheeraj Jangda , Planner , Majid Al Futtaim

Basically

Gross Margin: Is the percentage of Gross Profit against Net Sales

Gross profit margin: (Sales- COGS)/Sales

contribution margin: Net sales - variable cost

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