A price increase should be tested against possible changes in volume and costs. A higher margin per unit does not automatically increase total contribution if customers buy substantially fewer units.
Start with net selling price, variable cost and current volume using the same basis. Separate the effect of discounts and changing product mix. Estimate realistic customer responses rather than assume every buyer accepts the new price.
In a simplified example, a price of 100, variable cost of 60 and 1,000 units produce 40,000 of contribution. At a price of 110 with the same unit cost, 800 units produce the same contribution. This ignores other changes and is a scenario calculation, not a demand forecast.
Review fixed costs, capacity and cash collection alongside contribution. Test a range of volume outcomes and identify the evidence needed before a broad rollout. Monitor actual results so that an initial pricing assumption can be corrected.
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