What is the contribution margin.?

Question

and why is it important for managers to know the contribution margins of their products?

Answer 1

Contribution Margin is a term for a company's internal measurement of net income for a department or segment of the business or product line. It's the amount of cash the product line after costs directly attributable to that product line aare subtracted out.

Example
Product "Beer a" sells 100,000 units last month at $4 per unit. it costs $2 per unit in direct manufacturing costs to make and indirect costs salaries, delivery, packaging, overhead are $1 per unit. Contribution Margin for the month is $100,000 (or $1 per unit). The $100k is what the company sees as net income for that product.