The Importance of Calculating Marginal Contribution
Posted: Sun Jan 12, 2025 8:05 am
The importance of calculating this indicator is highly valued in the management field. The following arguments support this idea.
Manager Performance Assessment
Marginal profit and costs allow you to assess how effectively the manager carries out the company's key operations. The specialist has the ability to directly influence the factors that determine the level of marginal profit.
For example, the head of the sales department helps increase the volume of sales of products or services, controls the prices for the purchase of goods and establishes a system of remuneration for managers. In turn, the head of production controls the expenditure of materials and sets rates for workers on a piecework basis.
If the marginal profit indicators remain at the same level or rapidly increase with each new reporting period, this indicates that the manager is successfully carrying out his management activities.
Break-even point study
To calculate the break-even point, information russia phone data about the marginal profit is used - this is the sales volume at which the company begins to make a profit.
Manager Performance Assessment
Source: shutterstock.com
For calculation purposes, all expenses are classified as variable and fixed. We will discuss this point in more detail below.
As revenue increases, the profit margin also increases and, having reached a certain level, corresponds to fixed costs. This is the moment when the break-even point is reached. With further growth in revenue, the company will begin to make a profit.
To calculate the break-even point, you need to divide the fixed costs (FTC) by the marginality ratio:
B = POST / M
The key performance indicators of the Bravo enterprise for the first quarter of 2024 are as follows:
The amount of marginal profit is 14,000,000 rubles.
Variable costs - 10,000,000 rubles
Marginality:
M = (14,000,000 ₽ - 10,000,000 ₽) / 14,000,000 ₽ x 100% = 30%
Given fixed costs of 3,000,000 rubles, the break-even point for Bravo is:
B = 3,000,000 ₽ / 0.30 = 10,000,000 ₽
Manager Performance Assessment
Marginal profit and costs allow you to assess how effectively the manager carries out the company's key operations. The specialist has the ability to directly influence the factors that determine the level of marginal profit.
For example, the head of the sales department helps increase the volume of sales of products or services, controls the prices for the purchase of goods and establishes a system of remuneration for managers. In turn, the head of production controls the expenditure of materials and sets rates for workers on a piecework basis.
If the marginal profit indicators remain at the same level or rapidly increase with each new reporting period, this indicates that the manager is successfully carrying out his management activities.
Break-even point study
To calculate the break-even point, information russia phone data about the marginal profit is used - this is the sales volume at which the company begins to make a profit.
Manager Performance Assessment
Source: shutterstock.com
For calculation purposes, all expenses are classified as variable and fixed. We will discuss this point in more detail below.
As revenue increases, the profit margin also increases and, having reached a certain level, corresponds to fixed costs. This is the moment when the break-even point is reached. With further growth in revenue, the company will begin to make a profit.
To calculate the break-even point, you need to divide the fixed costs (FTC) by the marginality ratio:
B = POST / M
The key performance indicators of the Bravo enterprise for the first quarter of 2024 are as follows:
The amount of marginal profit is 14,000,000 rubles.
Variable costs - 10,000,000 rubles
Marginality:
M = (14,000,000 ₽ - 10,000,000 ₽) / 14,000,000 ₽ x 100% = 30%
Given fixed costs of 3,000,000 rubles, the break-even point for Bravo is:
B = 3,000,000 ₽ / 0.30 = 10,000,000 ₽