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The Impact Of The Contribution Margin On The Activity Of A Company

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  • RUS MIRCEA-IOSIF

    (NATIONAL INSTITUTE OF RESEARCH & DEVELOPMENT IN CONSTRUCTION, CLUJ-NAPOCA, ROMANIA)

Abstract

Contribution margin is an economic-financial indicator that is the basis for determining the profit of a commercial company, taking into account variable costs and, at the same time, giving us the possibility of obtaining a break-even point that determines the value of sales for the company to make a profit. At the same time, it allows the use of scenarios both in the sale of products and in the case of price changes or changes in variable costs. Contribution margin also makes it possible to assess whether a particular product or service is profitable and therefore worth continuing to offer, which makes it possible to identify products that have a high contribution margin and are valuable to the company.This indicator is used in financial projections to estimate the impact of sales on profit, which is the basis for budgeting for a financial year. In our scientific approach, we have tried to show all these things, in particular by using the scenario method, especially in the current conditions where the variation of some expenses underlying variable costs change their values quite often and different strategies have to be applied in order to respect the indicators that were the basis for the budgeting. It is not always possible to meet these indicators, but in today's market conditions, the companies that are likely to survive are those that are able to adapt quickly to these market changes and, not least, to the changes made by their competitors in the same competitive market, because let's not forget that there are several competitors in a market and each one is trying to maximise its profit in order to continue its activity.

Suggested Citation

  • Rus Mircea-Iosif, 2025. "The Impact Of The Contribution Margin On The Activity Of A Company," Annals - Economy Series, Constantin Brancusi University, Faculty of Economics, vol. 5, pages 121-126, October.
    • Handle: RePEc:cbu:jrnlec:y:2025:v:5:p:121-126
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    References listed on IDEAS

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    1. Kamer-Ainur Aivaz, 2020. "Considerations on Asset Management and Turnover Factorial Correlations: The Case of Dobrogea Region, Romania," Ovidius University Annals, Economic Sciences Series, Ovidius University of Constantza, Faculty of Economic Sciences, vol. 0(2), pages 68-74, December.
    2. Alina (Chiriac) Matei & Kamer-Ainur Aivaz, 2023. "Exploratory Analysis of Assets Nonconformities in Financial Statements," Ovidius University Annals, Economic Sciences Series, Ovidius University of Constantza, Faculty of Economic Sciences, vol. 0(1), pages 978-985, August.
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