Calculate net order revenue, then subtract the cost of all supplied goods and the direct costs of serving the order. Include free scheme units, earned rebates, freight and return effects once. The remainder is contribution before any overheads you have not allocated.
Start with the full offer
A dealer agrees to buy 100 units, but the offer includes five free units, delivery and a rebate. Multiplying the billed quantity by the selling price will not show what remains for your business.
Keep the quotation, scheme terms, product cost and delivery estimate together. State whether figures include taxes and whether freight is already included in product cost. The example here uses amounts excluding recoverable taxes and treats outward freight separately. It is an operating worksheet, not a statutory accounting calculation.
A fictional order calculation
Assume 100 paid units at ₹500 each, plus five identical free units. Each supplied unit costs ₹360. A 2% rebate on billed goods value is earned, outward freight costs ₹1,500 and direct handling costs ₹300.
| Calculation | Amount |
|---|---|
| Billed goods: 100 × ₹500 | ₹50,000 |
| Earned rebate: 2% × ₹50,000 | −₹1,000 |
| Net revenue | ₹49,000 |
| Goods supplied: 105 × ₹360 | −₹37,800 |
| Outward freight | −₹1,500 |
| Direct handling | −₹300 |
| Contribution before other costs | ₹9,400 |
The contribution rate is ₹9,400 ÷ ₹49,000 = 19.18% of net revenue, rounded to two decimals. Ignoring the scheme units would overstate it by ₹1,800. The five free units cost money even though they add no billed revenue.
ACCA defines contribution as revenue less variable costs. Here, all listed order costs are assumed variable; any omitted variable cost would reduce the result further.
Do not call this net profit
The ₹9,400 still has to help cover costs omitted from this worksheet, such as rent and salaries. Financing costs or expected credit losses have not been estimated either. Identify these exclusions before comparing orders with very different payment terms.
Software margin fields can use narrower definitions. Odoo’s margin documentation, for example, describes a sales-price-versus-product-cost calculation. Check what your own report includes rather than assuming its margin already deducts every commercial cost.
Test a return without counting it twice
In a separate scenario, ten paid units are returned unused and accepted back into saleable stock. Assume the refund is ₹4,900 after reversing the proportionate rebate, stock cost of ₹3,600 is recovered, and reverse freight is ₹400. All other terms remain unchanged; no scheme clawback applies in this example.
The contribution change is −₹4,900 + ₹3,600 − ₹400 = −₹1,700. Revised contribution is ₹7,700. If the goods cannot be resold, that stock-cost recovery assumption fails. If your source report already includes the return and credit, do not deduct them again.
Use the result to review terms
Compare alternatives such as a different order size, paid delivery or a smaller scheme. Recalculate each option using the same definitions. “Freight customer dega” is useful only when the quotation and actual charges reflect that agreement.
Save estimated and actual costs in separate columns. After delivery, replace estimates with supported amounts and investigate the difference. An assistant could help prepare that comparison when the necessary records exist. These calculations do not establish that Dhandha GPT currently produces a complete order-profit report or negotiates terms.
Questions you might ask
Do free scheme units affect order contribution?
Yes. Include the cost of every supplied unit, including free units, while keeping billed revenue separate.
Is order contribution the same as net profit?
No. Contribution here deducts the listed goods and direct costs. It excludes overheads and any other costs not included in the worksheet.