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CS Executive · Corporate Accounting and Financial Management · Operational Approach to Financial Decision

In break-even analysis, the contribution margin per unit of a product is best described as:

Contribution margin per unit is selling price per unit less variable cost per unit. It shows how much each unit sold contributes towards recovering fixed costs and then generating profit. Deducting total cost instead would give profit per unit, not contribution.

  1. ASelling price per unit minus variable cost per unitCorrect
  2. BSelling price per unit minus total cost per unit
  3. CFixed cost per unit minus variable cost per unit
  4. DSelling price per unit minus fixed cost per unit

Explanation

Contribution per unit is the amount each unit adds towards covering fixed costs and then profit. It equals selling price less variable cost per unit. Subtracting total cost gives profit per unit, which is a different measure and not contribution.

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