The contribution margin approach helps managers in pricing decisions because the relationships among variable costs, fixed costs and selling price changes are easier to show and understand.

Question

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The contribution margin approach shows the amount by which revenue exceeds variable costs and how much is left over to contribute towards covering fixed costs and profit. This makes it easier for managers to analyze the impact of changes in variable costs, fixed costs, and selling price on profit margins and make informed pricing decisions that can increase profitability.

The Contribution Margin Approach Helps Managers in Pricing Decisions Because