Using Menu Engineering to Increase Profits Stephen M. LeBruto, Ed. Contribution Margin is defined as Selling Price minus Variable Costs.
Popularity is measured by the Sales Mix of competing menu items.
This is accomplished by computing the individual contribution margin for each of the individual menu items and then multiplying it by the number of sales for each particular item in the menu section. The total of each item's total contribution margin is summed and divided by the total number of items that were sold within this menu classification, resulting in a weighted average contribution margin. Those menu items that experienced an individual contribution margin greater than the weighted average contribution margin, receive a classification of high contribution margin, and those that do not achieve the weighted average contribution margin, are labeled low. However, most operators chose not to embrace this tool, because most performance evaluations are based on cost percentages rather than contribution margin. The answer depends on how your salary is computed.