Contribution and Contribution analysis: Difference between pages
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''Cost and management accounting.'' | |||
In cost and management accounting, | In cost and management accounting, contribution is Revenue less incremental variable costs. | ||
Contribution analysis seeks to identify contribution per unit of production and total contribution. | |||
When total contribution is maximised, profit will be maximised. | |||
The key insight from contribution analysis is that sunk costs (already committed costs) are not relevant for short term decision making: | |||
'Sunk costs don't count.' | |||
== See also == | == See also == | ||
* [[Break even point]] | * [[Break even point]] | ||
* [[Contribution | * [[Contribution]] | ||
* [[Fixed cost]] | * [[Fixed cost]] | ||
* [[Limiting factor]] | * [[Limiting factor]] | ||
* [[Management accounting]] | * [[Management accounting]] | ||
* [[Margin of safety]] | * [[Margin of safety]] | ||
* [[ | * [[Sunk cost]] | ||
* [[Variable cost]] | * [[Variable cost]] | ||
[[Category:Accounting,_tax_and_regulation]] | [[Category:Accounting,_tax_and_regulation]] | ||
Revision as of 08:28, 20 March 2019
Cost and management accounting.
In cost and management accounting, contribution is Revenue less incremental variable costs.
Contribution analysis seeks to identify contribution per unit of production and total contribution.
When total contribution is maximised, profit will be maximised.
The key insight from contribution analysis is that sunk costs (already committed costs) are not relevant for short term decision making:
'Sunk costs don't count.'
