- This topic has 1 reply, 2 voices, and was last updated 8 years ago by
.
Viewing 2 posts - 1 through 2 (of 2 total)
- Posts
why do we take contribution as the income lost(oppurtunity cost) rather than profit.as in how do we know to get the profit or contribution as that cost
Hopefully I’ve understood your question correctly – if not -please put me right.
You would use contribution instead of profit because the difference between them is fixed overheads and these are generally not relevant unless they are incremental to the decision.
The only time you would include profit -ie contribution less fixed overhead – is if the fixed overhead has been incurred additionally because of the decision being made.
Hope that helps…
Viewing 2 posts - 1 through 2 (of 2 total)
- You must be logged in to reply to this topic.