Question

LO 3.1Define and explain contribution margin on a per unit basis.

Answer 1

CM per unit= per unit sales price - variable cost per unit

Step-by-step explanation:

Contribution margin is value realized or left over which first cover fixed costs first and then is realized as profit. OR

The amount by which a product’s selling price exceeds its total variable cost per unit and can be calculated either in dollars (currency value) or as a percentage.

For example, if a Manufacturer sells its products for $200 and incurs variable costs of $20 per unit. In order to calculate their per unit contribution margin, we use the formula
`CM per unit= per unit sales price - variable cost per unit`

Their CM Per unit would be $180 after subtracting their variable cost.