Controllable margin is considered to be the best measure of a manager’s performance in efforts to control revenue and costs. Controllable margin is just one of many other profit measures, such as gross profit and operating profit. Controllable margin focuses on variable costs as they are constantly changing and therefore far more unpredictable than fixed costs. Variable costs could be very low one month, and then very high the next.
Gross profit is the difference between revenue and the cost of making a product and service before deducting other costs such as tax, interest payments and various other overheads. Operating profit is earned from a firm’s core business operations and does not include any profits earned from the firm’s investments and the effects of interest and taxes. The formula is operating profit = operating profit - operating revenues. These profits tend to focus more on fixed costs than on variable costs.