ClearCFO learning guide · Updated 27 September 2026 · Educational information
Name the denominator
Gross margin divides gross profit by revenue. Markup divides gross profit by the cost base. Contribution deducts costs that vary with activity. State which costs are included before comparing products or periods.
Look below the headline
Discounts, returns, freight, commissions and customer-service demands can change economics. A customer with a strong gross margin may still use substantial support capacity or pay late.
Check price changes against volume
A price increase is useful only in the context of demand, competitor responses, customer contracts and costs. Build a scenario for both the proposed price and the expected volume response.
Turn analysis into a decision
Review the largest products or accounts, reconcile the cost allocation and make the proposed change measurable. Track realised prices and contribution after implementation rather than relying only on list-price changes.
Further reading: ACCA: profitability and cost analysis.
Examples are illustrative and simplified. Apply definitions and assumptions appropriate to your business; obtain professional review for material decisions. Read the financial disclaimer.