It's always important to know how much profit a company is making. Many business owners look at the profit margin. This is the amount of money made after-sales. However, if you want to know how much a certain product adds to a company's profit, you need to know the contribution margin. The contribution margin is a financial analysis tool that is often misunderstood by business managers. A contribution margin analysis Is a great tool for business managers to implement. As a matter of fact, it is one of the best tools for determining what is making your company money.
When companies want to increase profits, it's best to study the contribution margin and the gross profit margin..