Contribution margin

The contribution margin ( engl. contribution margin ) is in cost and management accounting, the difference between the revenues generated (sales ) and the variable costs. It is the amount available to cover fixed costs available. The contribution margin may be related to both the total amount (DB ) of a product, as well as a unit of measure ( db ) ( Size ).

Strictly speaking, one can not speak of a breakeven analysis. There are several differing models which, although they strive for the same goal, but this follow different paths. The primary purpose of the contribution margin calculations, the successful identification and secondary offer calculation to form a price.

Motivation of marginal costing

In the full cost accounting mainly used in German-speaking countries ( direct costs ) and indirect costs (overheads ), a distinction between a cost object directly attributable costs. The overhead costs are distributed over allocation formula on the products. A typical example of this method is the overhead calculation. The levy will never be perfect, so that with increasing allocation is less and less clear whether a product can still be produced or sold below cost.

At this point, put a consideration of alternative concepts, which will result in one hand, the standard costing and on the other hand, the contribution margin accounting.

Mathematical definition

The contribution margin is defined by the formula

Where the proceeds of the period and the variable costs of the period referred to.

The contribution margin per unit ( piece also Contribution margin or rarely cover margin ) is calculated by

Here the unit price ( or revenue per unit ) and the variable costs.

Relative contribution margin

The relative contribution margin ( gross profit rate also ) refers to a factor with consumption, which is required for the generation of contribution margin:

Exists within a company is a bottleneck for a factor of production, and may from this factor, several products are produced, can be determined by the relative contribution margin, which product should be the factor most efficiently exploited and therefore produces. The relative contribution margin ( also referred to herein as a bottleneck specific contribution margin ), indicates the opportunity costs in the event that you decide against the manufacture of the product.

An example is the shortage of capacity, thereby reducing the time required for production, will be included as a key determinant in the calculation. In this case, the relative contribution given by:

Deckungsbeitragsrechnung

The breakeven analysis is a method for determining the operating results of a company using the margins of the manufactured products. We distinguish the single-stage margin accounting ( Direct Costing ) and the multistage contribution margin accounting (fixed cost calculation). In the single-stage Deckungsbeitragsrechnung first the summed contribution margins are determined and then subtracted from these the complete fixed costs.

The multistage contribution margin accounting tries to further split the fixed costs and the costs attributable to the causative divisions. Like all cost accounting practices is the retrospective analysis of marginal costing because of the lack of binding to the already elapsed process unsuitable to allow a controlling intervention in an ongoing operational events. So there are definitely companies that 5-stage, sometimes even 13 - have established or even multistage contribution margin accounting.

For single-stage margin accounting

Example of detailed single-stage margin accounting:

Example multistage contribution margin accounting

A multistage contribution margin accounting for a manufacturing company with two product groups, a number of areas and products is represented by T. Balaguer in a basic training course for accounting:

Even if the table appears reasonable, the following guidelines for the practice must be observed. The division into variable and fixed costs is in practice not as clear-cut as suggested by the examples. There are certain costs, such as set-up costs that are not clearly assigned. The relevant data, such as revenues, must as separate, scored with the product revenue to be determined ( or costs ). This is not always guaranteed and the limit of differentiation is limited by the accuracy of the data collection. Finally, the allocation of fixed costs to groups or areas is arbitrary to some extent, for example, can not accurately determine whether an advertisement for a specific product not affected sales of another product.