Managerial use of contribution margin analysis: A case study in a food and beverage establishment

The contribution margin is defined as the difference between the selling price and variable cost of a product. The concept of contribution margin is crucial for businesses in terms of covering fixed costs and achieving end-of-period profits. This research aims to calculate the contribution margins of meat products in the menu of a food and beverage establishment based on sales quantity, selling price, and cost information. The obtained results will be utilized for various managerial decisions such as multiple break-even points, sales mix analysis, and product profitability analysis. The study utilizes data from a sample case study conducted in a food and beverage establishment in Mersin province for the months of June, July, and August 2023. The research addresses questions such as: What are the contribution margins and contribution ratios of the products on the menu, and do they vary by month? How can the status of products within the menu be interpreted based on calculated contribution margins and ratios? What managerial insights can be derived from the contribution margin analysis results for decisions related to pricing, break-even point analysis, product profitability analysis, cost control, customer satisfaction, and strategic planning? The study revealed varying contribution margins for different products, and total contribution margins differed based on sales quantities. Additionally, it was observed that contribution margin ratios for the products remained constant at 65%. Some products with high sales volumes had low contribution margins, prompting the development of recommendations. Particularly, products with low break-even sales quantities but high unit contribution margins were examined, and pricing strategies for these products were suggested. The interpretation of results, along with evaluations of how products contribute to covering fixed costs, impacting overall profit, and aligning with profit goals, is expected to contribute to more effective management decisions for strategically important products within the business.