Pricing is not designed to cover total costs but to maximize total contribution-that is, unit price minus unit variable costs.

Question

Pricing is not designed to cover total costs but to maximize total contribution-that  is, unit price minus unit variable costs.

Quizplus · Accepted Answer

Pricing strategies often aim to maximize total contribution (revenue from a product minus its variable costs) rather than just covering total costs, which include both fixed and variable costs. This approach helps in maximizing profits by focusing on the incremental benefit of selling additional units.

Pricing Is Not Designed to Cover Total Costs but to Maximize