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Contribution calculation | Free template

Contribution calculation is a free template to establish a product calculus on the principles of contribution calculations. A contribution calculation is a product calculus where incomplete allocation of costs is made to products, only incremental costs are allocated to objects.

Contribution calculation can be used both as a preliminary calculation and as a control calculation after the production is finished. Contribution calculation can form a basis for pricing decisions or profitability analysis. Common uses for contribution calculations are to set prices when there is available capacity or in product mix decisions when there are bottlenecks in production. In a contribution calculation the concepts of incremental cost and common cost are used. Incremental costs are costs incurred due to and influenced by the object while common costs are costs that are independent of objects. In contribution calculations the concept of incremental revenue is also used and constitutes income due to and influenced by the object, such as what are our revenues if we implement a particular campaign.

Contribution calculations can be made with step calculations where common costs on one level represent incremental costs on the next level. In a contribution calculation the profitability of a object is named as contribution margin and contribution margin in percent. Contribution margin is the incremental revenue minus the incremental cost and the contribution margin in percent is the contribution margin divided by the incremental revenue. Contribution margin times the volume represents a total contribution margin and overall contribution margin in the whole company minus the common costs gives the profit for the entire company.

In this template you can do contribution calculations for multiple products, set prices with mark-ups and calculate contribution margin and contribution margin in percent.
Updated: 01-01-2015 | Created by

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Tags: products decision making cost calculations excel spreadsheet