Gross margin and contribution margins are two important, yet separate measures companies can use to determine how profitable their operations are. Gross margin is revenue minus total cost of the goods sold. Contribution margin is revenue minus variable costs. According to Datar and Rajan (2018), the gross margin measures how much a company can charge for its products over and above the cost of acquiring or producing them. Companies, such as brand-name pharmaceuticals producers, have high gross margins because their products are often patented and provide unique and distinctive benefits to consumers. In contrast, manufacturers of generic medicines and basic chemicals have low gross margins because the market for these products is highly competitive. Contribution