Gross margin and contribution margin are related but give different insights to managers.

Question

Quizplus · Accepted Answer

Gross margin and contribution margin are both measures used to analyze profitability, but they focus on different aspects of the business. Gross margin is the difference between revenue and the cost of goods sold, while contribution margin is the difference between revenue and the variable costs of producing the goods or services. Gross margin provides information about the overall profitability of the business, while contribution margin helps managers understand how changes in sales volume or pricing affect profitability. Therefore, both measures are important for managers to consider in making decisions about pricing, production, and cost management.

Gross Margin and Contribution Margin Are Related but Give Different