Price minus the variable cost per unit equals ______.

Price minus the variable cost per unit equals ______.

• A. Break-even point per unit
• B. Gross margin per unit
• C. Contribution per unit
• D. Net profit per unit

Answer: (C)

The amount left from the selling price after covering the variable costs per unit is the contribution per unit. This shows how much each unit contributes toward fixed costs and profit once those variable costs have been paid. It’s the key figure used to decide how many units are needed to break even, since break-even in units equals fixed costs divided by the contribution per unit. This differs from gross margin per unit, which uses cost of goods sold, and from net profit per unit, which would subtract fixed costs as well. So price minus the variable cost per unit is precisely the contribution per unit. For example, if the price is 50 and the variable cost per unit is 30, the contribution per unit is 20.

The amount left from the selling price after covering the variable costs per unit is the contribution per unit. This shows how much each unit contributes toward fixed costs and profit once those variable costs have been paid. It’s the key figure used to decide how many units are needed to break even, since break-even in units equals fixed costs divided by the contribution per unit. This differs from gross margin per unit, which uses cost of goods sold, and from net profit per unit, which would subtract fixed costs as well. So price minus the variable cost per unit is precisely the contribution per unit. For example, if the price is 50 and the variable cost per unit is 30, the contribution per unit is 20.