ECONOMICS

Detailed explanation-1: -The contribution margin is computed as the selling price per unit, minus the variable cost per unit. Also known as dollar contribution per unit, the measure indicates how a particular product contributes to the overall profit of the company.

Detailed explanation-2: -Contribution margin per unit formula would be = (Selling price per unit – Variable cost per unit.

Detailed explanation-3: -In companies that sell products, a contribution margin is the amount of money, or profit, a product might generate for the company in a normal economy. It is also called the gross operating margin. In simple terms, it is the difference between the amount it costs to make a product and its sale price.

Detailed explanation-4: -Thus, the selling price per unit formula to find the price per unit from the income statement, divide sales by the number of units or quantity sold to identify the price per unit. For example, given sales of $80, 000 for the year and 2, 000 units sold, the price per unit is Rs. 40 (80, 000 divided by 2, 000).

Detailed explanation-5: -What is variable margin? Also known as the variable contribution margin or contribution margin, the variable margin refers to the margin that results from subtracting variable production costs from revenue. While variable margin accounts for a product’s variable costs, it doesn’t account for any associated fixed costs.