Question

A manager utilizes contribution margin matrix analysis to evaluate her menu. what would be a good marketing strategy to use on an item she determines is very popular but has a low contribution margin?

Answer 1

Reduce the item's prominence on the menu.

D = 1 - (percentage of cost of groceries + percentage of variable cost). This represents the item's contribution margin (including non-food variable costs). The GV formula is used to create a specific GV for the entire menu and then used to calculate her GV for individual menu items.

To calculate the break-even point in units, use the following formula: Break-even point (units) = fixed cost ÷ (selling price per unit – variable cost per unit) or in sales dollars , using the following formula: break-even point - points (sales) = fixed costs ÷ contribution margin.

Another factor to consider when considering a menu is the popularity of the item. Popularity is determined by comparing an item's sales to its expected popularity. Projected popularity is the projected menu mix (also known as the sales mix) if all menu items within a category were equally popular.

Learn more about contribution margin at

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