In cost-volume-profit analysis, the unit contribution margin is:
A) The same as the contribution margin ratio.
B) Sales price per unit less unit total cost per unit.
C) Sales price per unit less total variable cost per unit.
D) Sales price per unit less cost of goods sold per unit.
E) Sales price per unit less unit fixed cost per unit.

Question

Quizplus · Accepted Answer

The unit contribution margin is the amount that each unit sold contributes towards covering the fixed costs of the business after accounting for the variable costs associated with producing that unit. It is calculated by subtracting the total variable cost per unit from the price at which the unit is sold. Thus, option C is the correct answer. Option A is incorrect because the contribution margin ratio is the contribution margin (in dollars) divided by total sales, and does not relate to a unit of sale. Option B is incorrect because it refers to the unit total cost, which is both fixed and variable costs, whereas the unit contribution margin only includes variable costs. Option D is incorrect because cost of goods sold (COGS) only includes the cost of producing the product, not other variable costs associated with selling it. Option E is incorrect because fixed costs are not included in the unit contribution margin calculation.

In Cost-Volume-Profit Analysis, the Unit Contribution Margin Is