Gross Margin vs Contribution Margin

This problem tests your understanding of two core profitability measures that often come up in SaaS and other operating model discussions. Gross margin looks at revenue after Cost of Goods Sold and therefore reflects the direct costs tied to delivering the product, while contribution margin focuses on unit economics by comparing revenue to variable costs only. Interviewers ask this kind of question to see whether you can separate fixed from variable costs, understand how margins are used in performance analysis, and explain why different margin measures matter when evaluating products, pricing, and scalability in an investment banking context.