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Gross Profit on Sales vs Contribution Margin

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What are the specific benefits to be derived from Gross Profit on Sales as opposed to Contribution Margin?

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Solution Summary

This solution discusses gross profit, contribution margin and decision making based on contribution margin in 232 words.

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Gross profit on sales, gives the profit per unit sales. From this, we can understand the profitability of each unit. This will help us in comparing the performance of production unit with another. For example, bankers always use this ratio, to find out if the business is basically viable. On the other hand, contribution margin is a ...

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