What is the contribution margin per unit given selling price per unit is $50 and variable cost per unit is $30?

What is the contribution margin per unit given selling price per unit is $50 and variable cost per unit is $30?

• A. 50
• B. 20
• C. 30
• D. 0

Answer: (B)

The key idea is how much revenue from each unit remains after paying the variable costs, to cover fixed costs and contribute to profit. The contribution margin per unit is found by subtracting the variable cost per unit from the selling price per unit. With a selling price of 50 and a variable cost of 30, the margin is 50 − 30 = 20. That $20 per unit is what goes toward fixed costs and profit. If you compare other possibilities: 50 ignores variable costs, 30 is the variable cost itself, and 0 would mean the price equals the variable cost. So the correct contribution margin per unit is 20.

The key idea is how much revenue from each unit remains after paying the variable costs, to cover fixed costs and contribute to profit. The contribution margin per unit is found by subtracting the variable cost per unit from the selling price per unit. With a selling price of 50 and a variable cost of 30, the margin is 50 − 30 = 20. That $20 per unit is what goes toward fixed costs and profit. If you compare other possibilities: 50 ignores variable costs, 30 is the variable cost itself, and 0 would mean the price equals the variable cost. So the correct contribution margin per unit is 20.