Calculating contribution margin

You can use a contribution margin in IBM® Cognos® Insight to show which products are the most profitable, which ones are breaking even, and which ones are costing you more than they earn in revenue.

About this task

You can use this information when planning sales forecasts and sales incentives as well as the product mix for next year. You can also add measures to allocate additional costs that are not included in the unit cost, such as overhead. You can spread these additional costs proportionally, and include them in your contribution margin calculation.

The steps use unit price and cost of goods listed for each product as an example. You want to calculate the contribution margin for each product.

Procedure

  1. Select the rows or columns that you want to use.
  2. Click the Calculate icon Calculate icon, and then click one dimension minus another dimension.
    For example, select Unit Price - Cost of Goods.
  3. To rename the new row or column that contains the calculation, highlight it and type Contribution Margin.
    Important: When you rename a data item, you are renaming it in the cube, not just in the current widget. Therefore, the new name will be reflected in every widget that includes this data item.
  4. To see which products contribute the most, right-click the Contribution Margin heading, and click Sort.
  5. Specify if you want to sort by value or label and then click Sort Ascending or Sort Descending.