Which of the following best describes the contribution per unit?

• A. Price minus fixed cost per unit
• B. Variable cost per unit
• C. Price minus variable cost per unit
• D. Total cost per unit

Answer: (C)

Contribution per unit shows how much revenue from selling one unit remains after paying the variable cost for that unit. This remaining amount is what can cover fixed costs and contribute to profit, so it equals price per unit minus variable cost per unit. The fixed costs don’t change with each additional unit, so subtracting a fixed cost per unit isn’t the right way to measure per-unit contribution. Subtracting the variable cost per unit alone describes costs, not the available margin. And total cost per unit mixes fixed and variable costs into an average, not the amount left over after variable costs. That’s why price minus variable cost per unit best describes the contribution per unit.