The Concept of Contribution and its Significance



Contribution is the difference net sales and marginal costs, and it is used to recover fixed costs first. Any excess over fixed costs would be profits. When a business manufacturers more than one product, the computation of profits realized on individual products may be difficult due to the problem of apportionment of fixed costs to different products., the rationale of contribution lies in the fact that fixed costs are done away with under marginal costing. The concept of contribution helps to determine the breakeven points, profitability of products, departments, etc., to select product-mix for profit maximization, and to fix selling prices under different circumstances such as trade depression, expert sales prices discrimination etc. contribution is the definite test to ascertain whether a product or process is worthwhile to continue among different products or processes.

The following two tabs change content below.
We, at, believe in sharing knowledge and giving quality information to our BMS students. We are here to provide and update you with every details required by you BMSites! If you want to join us, please mail to [email protected]

Leave a reply is aimed at revolutionising Bachelors in Management Studies education, also known as BMS for students appearing for BMS exams across all states of India. We provide free study material, 100s of tutorials with worked examples, past papers, tips, tricks for BMS exams, we are creating a digital learning library.

Disclaimer: We are not affiliated with any university or government body in anyway.

©2020 BMS - Bachelor of Management Studies Community 

A Management Paradise Venture

Ask Us On WhatsApp

Log in with your credentials


Forgot your details?


Create Account