Gross Margin vs Contribution Margin in Pricing Decisions
Is a product showing a gross loss really loss-making? The difference between gross profit and contribution margin, and the right measure for…
OUR SERVICES
Cost Accounting & Profitability Management Which products, customers and activities really make money?
We build a costing system that shows how costs arise, and link product, customer and business-line profitability to your pricing decisions.
The question behind this service
How do our costs arise, and how much profit do we make from each product, customer or activity? Cost accounting and profitability management answers that question in numbers: it assigns direct and indirect costs to the right cost objects, calculates unit costs and makes profitability visible by product, customer, project or business line.
The work starts with a cost-centre structure and allocation keys that fit your production or service model, and then connects to pricing and product-mix decisions through contribution margin and break-even analysis.
Who is it for?
- Manufacturers Businesses running many products, bills of materials and production lines.
- Project-based businesses Construction, engineering and service companies that want to track project cost and margin.
- Companies with broad customer portfolios Distributors and traders that want to see profitability, discounts and cost-to-serve by customer.
- Companies under pricing pressure Management teams that need data-driven pricing while input costs rise.
- Typical sectors Food, textiles, automotive suppliers, machinery, chemicals, construction and professional services.
COMMON CHALLENGES
The cost problems we see most often
True product cost is unknown
Costs are tracked in total; nobody knows what each product or order actually costs.
Apparent winners may be losing money
Overheads are misallocated, so some products or customers look profitable when they are not.
Prices are not linked to cost
Pricing follows competitors or habit rather than cost and margin.
Cost variances go untracked
The gap between planned and actual cost, and its cause, is not monitored.
Accounting and production data do not reconcile
Production records and financial records cannot be matched.
SCOPE OF SERVICE
What our cost and profitability work covers
Cost accounting system
Designing a costing and reporting system that fits your operations.
Direct and indirect costs
Classifying costs correctly and assigning them to cost objects.
Cost-centre structure
Cost centres and allocation keys by department, line, branch or project.
Product and service costs
Costing by product, order or service.
Unit cost analysis
Components of unit cost and how they change over time.
Fixed and variable costs
Separating cost behaviour and assessing the impact of capacity.
Contribution margin and break-even
Calculating contribution by product or customer and break-even volume.
Product and customer profitability
Breaking down profitability by product, customer, channel and business line.
Cost variances and pricing analysis
Standard-versus-actual variances and margin analysis for pricing decisions.
Is this scope right for your business?
In a short initial call we listen to your current situation and expectations, and define the right scope for your business together.
What it brings to your business
Data-driven pricing
Price and discount decisions rest on true cost and contribution.
Visibility of loss-makers
Products, customers or activities that erode profitability are identified.
Cost control
Regular variance tracking allows early action on cost increases.
The right product mix
Capacity and sales focus shift to the products that contribute most.
What you receive
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Product costing model
A model calculating direct and indirect costs by product or service.
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Cost-centre report
Expense structure of each cost centre and the results of allocations.
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Contribution margin analysis
Contribution and margin tables by product and customer.
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Product / customer profitability matrix
An analysis showing profitability at the intersection of products and customers.
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Break-even analysis
The sales volume needed to cover fixed costs, with sensitivities.
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Cost variance dashboard
A dashboard tracking standard-versus-actual cost differences and their causes.
How we work
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01
Process and data review
We review the production or service flow, bills of materials, work orders and accounting records.
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02
Costing design
Cost centres, cost objects and allocation keys are defined.
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03
Model and calculation
The product costing model is built; unit costs and contribution margins are calculated.
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04
Profitability analysis
Product, customer and business-line profitability and break-even analyses are prepared and reviewed with management.
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05
Monitoring and handover
A cost variance report is set up and the monthly update routine is handed over to your team.
Frequently asked questions
Do we need new software for a costing system?
Not always. The costing design comes first; we then assess whether it can run in your existing ERP or accounting system, and start in Excel if needed.
How are overheads allocated?
We choose allocation keys that match your operations — department, machine hours, labour hours or floor space — and agree them with management.
How is customer profitability calculated?
Product costs, discounts and customer-specific logistics, payment-term and service costs are deducted from revenue to calculate contribution by customer.
How does this differ from Management Consulting?
This service produces cost and profitability data. Management Consulting focuses on strategy, performance and management systems; it may use costing results but does not build the costing system.
How often can results be updated?
The model is designed for monthly updates, and the update routine is run together with your team during handover.
Request a cost and profitability consultation.
Tell us briefly about your product or service structure and the cost question you most want answered; we will discuss a suitable costing design together.
- Complimentary initial consultation
- Needs assessment
- Tailored approach
- advisory@primenumeris.com
- +90 553 012 13 27
- Bursa, Türkiye
Meeting request
Briefly describe your situation and we will contact you to arrange a suitable time to talk.