This activity is used to make changes in the contribution margins in each of the sales quotation lines. When a sales quotation line is entered, the contribution margin is calculated by the system based on the part cost, prices and discounts.
By using Manage Contribution Margins dialog, user can define the required margin and decide if the price or the discount should be adjusted in order to obtain the user-entered margin. If user selects the adjust price option, then the base price will be recalculated by the system in order to obtain the user-entered required margin. If user selects the adjust discount option, then the line discount percentage will be recalculated by the system in order to obtain the user-entered required margin. When it comes to discounts, only the line discount percentage will be adjusted. Group discount and additional discount will not be adjusted.
If the sales price is 300 and part cost is 150 then the system-calculated contribution margin will be 50% in the sales quotation line. If user wants to reduce the contribution margin to 25%, then it can be done by either adjusting the price or the discount. If adjust price option is selected, then calculated price will be 200. If adjust discount option is selected, then calculated discount will be 33.33%.