Contribution Margin and Gross Margin (Portuguese Version, Brazil)

The contribution margin and the gross margin are two complementary profitability indicators due to their different scope. The first contemplates "only" variable expenses but also "all" (not only production) variable expenses. The second refers only to industrial processes, including what is known as "full cost", which includes direct, variable and fixed manufacturing costs of a product and an appropriate share of indirect costs. The contribution margin can refer to the unit of product (when there is installed and unused capacity, that is, surplus) or to the unit of limited capacity or scarce resource (when it is at full capacity). Clarity in the above concepts greatly helps in decision making.