Product Profitability

Definition: The amount of profit each product makes

Example: If product A makes $10,000 in revenue and has $8,000 in costs, then it contributes a net $2,000 to the company’s total profitability

Why It’s Important: Knowing your product profitability, especially its costs and how they change when you produce more or less, allows you to set the pricing or sales volumes for that product to maximize profits.

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