Contribution Margin Approach

Contribution Margin Approach

Contribution margin analysis proposes a means through which a firm might profitably utilize its unused capacity. Contribution margin pricing involves simply the price that might be charged for an added product compared to the variable costs associated with adding that product. Hence, unused capacity can be evaluated for practice in terms of the variable cost connected with the incremental utilization of capacity and prices that customers would be willing to pay. Fully understanding the price-variable cost interrelationship embedded within the contribution margin is a key in the creation of value. Businesses might use this contribution margin ...