Question

ontribution margin is the difference between a. selling price and variable cost per unit. b. purchase price and variable cost per unit. c. selling price and fixed cost per unit. d. purchase price and fixed cost per unit.

Answer 1

Answer:

a. selling price and variable cost per unit.

Explanation:

The contribution margin is the share of revenue that a product contributes to pay for fixed costs and profits. The contribution margin can be calculated per unit or for an entire production. The total contribution margin is the margin for the entire product line or the business.

Calculating the contribution margin involves subtracting variable costs from the selling price. In other words, the contribution margin equals selling price minus variable costs. The concept of contribution margin assists management in determining break-even points and profitability at different production levels.