Which of the following is the correct formula to use to calculate the contribution margin per unit?
A)Selling price per unit less fixed costs and variable costs per unit.
B)Selling price per unit less fixed costs per unit.
C)Selling price per unit less variable costs per unit.
D)None of the answers is correct.

Question

Quizplus · Accepted Answer

The contribution margin per unit is calculated by subtracting the variable costs per unit from the selling price per unit. This is because the contribution margin represents the amount that each unit contributes towards covering the fixed costs and generating profit. Option A includes fixed costs in the calculation, which is incorrect for calculating the contribution margin per unit. Option B only includes fixed costs per unit, which is incomplete as variable costs must also be considered. Option D is incorrect as one of the options is correct.

Which of the Following Is the Correct Formula to Use