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Contribution

Forums › ACCA Forums › ACCA PM Performance Management Forums › Contribution

  • This topic has 3 replies, 3 voices, and was last updated 3 years ago by kish200.
Viewing 4 posts - 1 through 4 (of 4 total)
  • Author
    Posts
  • August 10, 2021 at 8:41 am #630999
    Kendra
    Participant
    • Topics: 3
    • Replies: 1
    • ☆

    I need help!

    Sales – Variable Cost = Contribution

    So, what does lost contribution means?

    August 10, 2021 at 2:20 pm #631055
    mrjonbain
    Moderator
    • Topics: 6
    • Replies: 2489
    • ☆☆☆☆☆

    It will depend on the context but it could ,for example, mean lost contribution which could have been made from selling a product has been lost because resources used in its manufacture have been used for an alternative use. Could often occur as one or more resources could be limited. Usually, an organisation will try to maximize best use for limited resources. Hope this helps.

    August 12, 2021 at 7:51 am #631284
    Kendra
    Participant
    • Topics: 3
    • Replies: 1
    • ☆

    Using the lecture video, Chapter 9 – Example 1. I do not understand why Rooks has a lost contribution of $15,000?

    August 12, 2021 at 10:00 am #631313
    kish200
    Participant
    • Topics: 24
    • Replies: 53
    • ☆☆

    Kendra wrote:Using the lecture video, Chapter 9 – Example 1. I do not understand why Rooks has a lost contribution of $15,000?

    Hi
    Its not a formula.
    Basically it is referring to opportunity cost, remember opportunity cost is the next best alternative forgone.
    So here basically you are looking at 2 situations:
    Either you continue to sell rooks which means you will earn the contribution of 15000 but also incur all the costs associated with rooks.
    Or you will stop to sell rooks and you will stop to incur all the costs. But because you stop to sell the rooks, you have now lost also the contribution of 15000.

    I hope this helps you understand.

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