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Contribution margin-based pricing
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<p>Contribution margin-based pricing is a <a href="/facts/Pricing_strategies/GafT35PV">pricing strategy</a> which works without any mention of gross margin percentages or sales (Gross Merchandise Volume). (German:<i>Deckungsbeitrag</i>) It maximizes the <a href="/facts/Profit_(accounting)/8W9Kw0fx">profit</a> derived from a company's assortment, based on the difference between a product's <a href="/facts/Price/yWQ8edfN">price</a> and <a href="/facts/Variable_cost/FRwUSFp5">variable costs</a> (the product's <a href="/facts/Contribution_margin/eEJky3wM">contribution margin</a> per unit), and on one's assumptions regarding the relationship between the product's price and the number of units that can be sold at that price. The product's contribution to total <a href="/facts/Operating_income/jvs9xNWQ">operating income</a> is maximized when a price is chosen that maximizes the 'contribution margin per unit X number of units sold'. </p>