Product pricing and promotion decisions should usually be based on their effect on contribution margin , not

Question:

Product pricing and promotion decisions should usually be based on their effect on , not on gross margin. Explain how using an absorption costing format for the income statement can provide misleading information on the effect of pricing and promotion decisions.

Contribution Margin
Contribution margin is an important element of cost volume profit analysis that managers carry out to assess the maximum number of units that are required to be at the breakeven point. Contribution margin is the profit before fixed cost and taxes...