In a business-cost analysis, which formula is used to calculate the average employee contribution (AEC)?

• A. Gross profit divided by the number of full-time employees
• B. Net profit divided by headcount
• C. Total revenue divided by employees
• D. Operating profit divided by departments

Answer: (A)

The idea is to measure how much value, on average, each employee contributes to the company’s profitability. Gross profit is what you have left from sales after covering the direct cost of producing goods or delivering services—focusing on the core profitability generated by operations before overhead and other expenses. Dividing that gross profit by the number of full-time employees gives the average gross-profit contribution per worker, which is exactly what average employee contribution (AEC) aims to capture. Using net profit would mix in all other costs (overheads, taxes, etc.), which shifts the focus away from the direct labor-driven portion of profitability. Using total revenue per employee ignores costs entirely, and dividing operating profit by departments doesn’t tie the measure to per-employee contribution.