contribution margin accounting

Description of your first forum.
Post Reply
tanjimajuha20
Posts: 477
Joined: Thu Jan 02, 2025 7:23 am

contribution margin accounting

Post by tanjimajuha20 »

An example: You want to sell a burger menu for 10 euros and expect to sell 50 units per day. This results in a turnover of 500 euros. From this sum you subtract all fixed and variable costs, for example 200 euros. If you have set a profit target of 100 euros, you are left with 200 euros for the cost of goods sold.


Compared to markup iceland phone data calculation , this method is more precise, but also takes more time . It is based on all costs being allocated precisely to individual dishes. First, you add up all the costs incurred in your catering business, i.e. goods, overhead and personnel costs . Then you calculate what percentage of the total turnover in your calculation is for food and what percentage is for drinks. The respective percentage must cover the same percentage of overhead costs.

For example, if you have overhead costs (costs that cannot be directly assigned to a cost center, such as those for heating, lighting, insurance, etc.) of 200,000 euros per year and 80% of your total annual turnover comes from the sale of food, then this must also cover 80% of the overhead costs. In the example, this would correspond to a total of 160,000 euros . If you sell 20,000 meals per year, the contribution margin per dish is 8 euros . You then add the goods and personnel costs to get cost coverage.

Since you don't just want to cover your costs but also make a profit with your food calculations, you add a certain profit margin plus sales tax to this total.

The formula is: cost coverage (= contribution margin + cost of goods + personnel costs) + profit markup + sales tax = final price of an item

mixed calculation

In contrast to the methods already presented, this method of calculation in the catering industry only takes into account factors that relate to the conditions of the market and ignores the value of the goods. The principle behind it: you make only small profits or even losses on some items, but you compensate for these with correspondingly higher profits on other items.

First, classify all the items on your menu into one of the following three types:

Key items: High-value items that you offer at a lower price than your competitors.
Pull items: Items that attract guests even if they don't bring much profit, such as a cheap lunch menu.
Compensating items : The items that bring you profits, with a markup that can range from 300 to 1,000%.
Post Reply