Start with billed revenue, then deduct the cost of all supplied units and direct order costs. Keep committed discounts separate from conditional rebates until earned. Allocate shared freight on one stated basis, link later dispatch costs, and record how much returned stock value is actually recoverable.
State the calculation basis first
This fictional worksheet uses 100 paid units at ₹500, five identical free units and cost of ₹360 for every supplied unit. Amounts exclude recoverable taxes. Outward freight and direct handling are separate variable costs. The result is contribution before omitted overheads, financing costs and credit losses; it is not net profit or statutory accounting advice.
Calculate the base order contribution
| 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 |
Contribution rate is ₹9,400 ÷ ₹49,000 = 19.18%, rounded to two decimals. Ignoring five free units overstates contribution by 5 × ₹360 = ₹1,800.
ACCA defines contribution as revenue less variable costs. Any omitted variable cost reduces this result.
Separate committed and conditional rebates
A guaranteed 2% discount belongs in the quotation case. A 2% month-end rebate earned only after a volume target needs two cases until the target is met.
| Scenario | Net revenue | Contribution |
|---|---|---|
| Conditional rebate not earned | ₹50,000 | ₹50,000 − ₹37,800 − ₹1,500 − ₹300 = ₹10,400 |
| Conditional rebate earned | ₹49,000 | ₹49,000 − ₹37,800 − ₹1,500 − ₹300 = ₹9,400 |
Do not recognise the lower contribution as actual until the condition is satisfied or otherwise provided for under the business’s agreed method.
Test returns with recoverability and scheme effects
Assume ten paid units are returned and ₹4,900 is refunded to the dealer after reversing the related dealer rebate. Reverse freight is ₹400.
| Return case | Contribution change | Revised contribution |
|---|---|---|
| All ten units return saleable; ₹3,600 stock cost recovered; no other scheme adjustment | −₹4,900 + ₹3,600 − ₹400 = −₹1,700 | ₹9,400 − ₹1,700 = ₹7,700 |
| Only ₹1,800 stock value recoverable; supplier charges wholesaler ₹500 because the return reverses upstream scheme support included in the ₹360 base unit cost | −₹4,900 dealer refund + ₹1,800 recovered stock − ₹400 reverse freight − ₹500 supplier charge = −₹4,000 | ₹9,400 − ₹4,000 = ₹5,400 |
These are explicit assumptions. The ₹500 is a charge from the supplier to the wholesaler, not a reversal of the dealer rebate. Record the dealer refund, recoverable stock value and any supplier charge separately. If the source report already includes any return, credit or charge, do not count it again.
Allocate shared and split-dispatch freight once
Choose one basis before comparing orders: actual weight, cartons, distance or another supported driver. Suppose a ₹3,000 shared freight bill covers Order A at 60 kg and Order B at 40 kg. Weight allocation assigns ₹1,800 to A and ₹1,200 to B; the allocations reconcile to ₹3,000.
Link extra freight from a later split dispatch directly to that dispatch and its order. Keep estimated and actual columns. The order total should equal allocated shared freight plus every linked direct dispatch charge, with no charge counted twice.
Odoo’s margin documentation illustrates a narrower sales-price-versus-product-cost field. Check your own report definition before treating its margin as this full worksheet.
Use the result to compare terms
Recalculate alternative order sizes, paid delivery or smaller schemes on the same basis. Dhandha GPT does not currently claim a complete automatic order-profit report or term negotiation.
Ask about a supported sales or returns question. Share the question and your software name without posting confidential order records.
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.