Which formula represents contribution per unit?

Which formula represents contribution per unit?

• A. Price per Unit
• B. Total Revenue per Unit
• C. Contribution per Unit
• D. Price minus Average Variable Cost

Answer: (D)

Contribution per unit shows how much each unit sold contributes to covering fixed costs and profit after variable costs are paid. It is calculated by taking the selling price per unit and subtracting the variable cost per unit. In this context, the price represents the selling price per unit and the average variable cost represents the variable cost per unit, so price minus average variable cost equals the contribution per unit. The other options don’t express this per-unit offset: price per unit is revenue per unit, total revenue per unit isn’t a standard metric, and simply saying “contribution per unit” isn’t a formula.

Contribution per unit shows how much each unit sold contributes to covering fixed costs and profit after variable costs are paid. It is calculated by taking the selling price per unit and subtracting the variable cost per unit. In this context, the price represents the selling price per unit and the average variable cost represents the variable cost per unit, so price minus average variable cost equals the contribution per unit. The other options don’t express this per-unit offset: price per unit is revenue per unit, total revenue per unit isn’t a standard metric, and simply saying “contribution per unit” isn’t a formula.