Question

Unit contribution margin is A. The contribution margin in dollars for all products. B. The contribution margin as a percentage for a single unit. C. The contribution margin as a percentage for all products. D. The contribution margin in dollars for a single product.

Answer 1

Answer:

The correct answer is:

The contribution margin in dollars for a single product. (D.)

Explanation:

The unit contribution margin is the amount in dollars by which the price of selling a product exceeds the total variable cost incurred in the manufacture of that product. Mathematically it is the selling price of a product minus the total variable cost incurred on the single product. It is the proportion of sales revenue that is not consumed by variable costs, hence is used for the coverage of fixed costs.

The importance of unit contribution margin is that it is used to calculate the break-even price of the product, when fixed costs are made up for. It measures how growth in sales translates to growth in profits.