Which per-unit measure represents the amount that contributes to fixed costs after variable costs are deducted?

Which per-unit measure represents the amount that contributes to fixed costs after variable costs are deducted?

• A. Price per unit
• B. Contribution per unit
• C. Fixed cost per unit
• D. Gross margin per unit

Answer: (B)

Contribution per unit is the amount each unit adds to covering fixed costs after variable costs are paid. It’s calculated as the selling price minus the variable cost per unit. This per-unit margin first covers fixed costs; once fixed costs are covered, the remaining contribution becomes profit. It’s different from price per unit (revenue before any costs), fixed cost per unit (an allocation, not a margin), and gross margin per unit (revenue minus cost of goods sold, a different profitability metric).

Contribution per unit is the amount each unit adds to covering fixed costs after variable costs are paid. It’s calculated as the selling price minus the variable cost per unit. This per-unit margin first covers fixed costs; once fixed costs are covered, the remaining contribution becomes profit. It’s different from price per unit (revenue before any costs), fixed cost per unit (an allocation, not a margin), and gross margin per unit (revenue minus cost of goods sold, a different profitability metric).