Starting your own business

About us Business Structures Business Plans Business Finance Flexible Business Loans Small Business Marketing Start an Internet Business Home Based Business Company Formation Accounting and Bookkeeping Business Zone Business Dictionary
Latest News : From North Korean gun running to El Chapo's drugs cartel; New Zealand Police have received more than 350 criminal investigation enquiries about NZ companies the notorious Taylors established - Interest.co.nz      Control is how SME owners can thrive - Bdaily      These are the 33 best places to do business around the world, according to the World Bank - Business Insider      Daily News 29 / 11 / 2018 - EU News      Where Should You Set Up Your EU Entity? - Government, Public Sector - European Union - Mondaq News Alerts      

Contribution

 

Contribution is the name given to the excess of monies earned over and above the direct costs incurred in generating that income.

For example, if a company was engaged in the making and selling of chairs. For each chair it sold it received the following income and incurred the costs listed below.

Income £50

Costs:
Wood £10
Direct labour £5
Glue £2
Varnish £2

The total direct costs are 10 + 5 + 2 + 2 = £19

The contribution which the sale of this chair is said to generate is therefore £31 (50 – 19)

It is very important to note that contribution is not the same as profit. Costs involved in calculating contribution are only the direct costs of producing that item. Profit is achieved by taking all expenditure, both direct and indirect in to consideration.

Indirect expenses such as rent, rates, selling costs and others which can not be directly attributed to one particular product or service have been covered in order for the company to make a profit.

Pricing decisions and contribution

 
Email This Page  Print This Page



 
 
Site Search
Take the 6 question quiz and test your knowledge on matters relating to starting your own business
1. Which of the following types of business structure must be incorporated by Companies House?
 
Sole Trader
Partnership
Limited Liability Partnership
  
Submit
 
Single Question Survey
Did you know that company formations can be carried out entirely online without any need for paper or written signatures?
 
Yes
No
  
Submit