What's the importance between contribution + profit, when starting up a business?

[cdwrover123]

What's the importance between contribution + profit, when starting up a business?. Business studies module at college i am studying thanks

[squarebear]

The "importance between"? i don't understand? Are you asking why it is important to have profit?

[DocHH]

There is not a definitive answer to your question. Is that nett profit, gross profit or PBIT, and how do you define Contribution.

Rather than trying to elicit answers here, I think you will learn more by consulting the recommended Course Literature. Your tutor is trying to get you to think for yourself, rather than repeat parrot fashion answers to questions you have posted here. If you do that you will at least realise your true potential rather than rely on others. It might take a bit more time, but at least it would be rewarding to know that it was the result of your own work.

[buildersmate]

What is generally meant by 'contribution' is the amount of positive (or negative) cash flow generated by an activity in the business. For the project-based organisation a contribution would consist of the sales from the activity less the direct costs; for a volume manufacturer a contribution per unit sold might be assessed - a Mars Bar might make 1p of contribution per unit of sale.
Contribution does not include business overheads, so it possible to make a positive contribution on all operational activities yet still make a net loss once overheads are accounted for.

[sumo19]

Contribution refers to the amount of money raised by a sale of a good that goes towards paying of fixed costs.

Profit is the amount of money generated by sales, minus total costs.

If you had fixed costs of 1000, and you sold a product for 200 which cost 50, then contribution would be 150.

You would then need to sell just over 6 products to break even. If you sell any more you will be in profit.