Marketing homework help!!!! Need it desperately!!!?

[Selina J]

I have to discuss how "Contribution" approach to costing can help in short term decision making. The answer should be about 1page.
I'D APPRECIATE THE HELP FROM ALL OF YOU!

[Hypermuse]

If its a page you should do the following structure:

Definition of contribution
Relation to short term decision making
Example
Other factors

Contribution costing basically allows for you to see how much money each product or service you produce gives you towards covering your fixed costs. It helps with short term decision making as fixed costs have to be paid no matter how much you produce and sell and therefore if there is a choice to be made knowing what will cover all or at least more of your fixed costs is important.

For example if two tight deadline orders come in and you can only meet one in time you may work out the contribution of each in order to see which will help cover more of your fixed costs.

However it is important to remember there may be other factors. For the example above the order which has a lower contribution may be more likely to reorder in the future than the order with the higher contribution. This means the long term must be looked at as well.