The contribution margin allows companies to adjust prices and maximize profit.

The contribution margin is used to understand how a product contributes to the business' profit. In brief, by deducting the variable cost of a product, you have the contribution margin. It allows companies to adjust prices and maximize profit.

Watch the video below for examples: https://www.youtube.com/watch?v=1TxWhgRPq3s

Source: "Contribution Margin: What It Is, How to Calculate It, and Why You Need It" by Amy Gallo on hbr.org