What is the term for the difference between the selling price per unit and the variable cost per unit?

• A. Contribution per unit
• B. Price per unit
• C. Fixed cost per unit
• D. Gross margin per unit

Answer: (A)

The main idea here is how much each unit adds to covering fixed costs and contributing to profit after variable costs are paid. This difference is called the contribution per unit. It shows how much money from every unit sold is available to cover fixed costs and then add profit once those are covered. For example, if the selling price is 20 and the variable cost per unit is 12, the contribution per unit is 8, meaning each unit helps pay fixed costs and then contribute to profit. This concept is central to cost-volume-profit analysis and pricing decisions. It’s not simply the price per unit, nor the fixed cost per unit, and it isn’t the gross margin per unit in this context, which would reflect different cost considerations.