Asked by Shayal Shiwani on May 27, 2024

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In cost-volume-profit analysis,the unit contribution margin is:

A) Sales price per unit less cost of goods sold per unit.
B) Sales price per unit less unit fixed cost per unit.
C) Sales price per unit less total variable cost per unit.
D) Sales price per unit less unit total cost per unit.
E) The same as the contribution margin ratio.

Cost-Volume-Profit Analysis

Cost-Volume-Profit Analysis is a managerial accounting technique that analyzes how changes in costs and volume affect a company's operating income and net income.

Unit Contribution Margin

The amount each unit sold contributes towards fixed costs and profits, calculated by subtracting variable costs per unit from the selling price per unit.

Variable Cost

Expenses that vary directly with the level of production or sales, such as materials and labor costs.

  • Gain an understanding of the contribution margin ratio and ascertain its role in break-even calculations.
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JW
jessica wynneMay 27, 2024
Final Answer :
C
Explanation :
The unit contribution margin represents the amount of revenue from one unit of product that goes towards covering the variable costs associated with producing that unit. Therefore, it is calculated as the sales price per unit less the total variable cost per unit. Option A is incorrect because it only subtracts the cost of goods sold and not other variable costs. Option B subtracts only unit fixed costs, but not other variable costs. Option D subtracts the total cost per unit including fixed costs, which is not the correct calculation for contribution margin. Option E is incorrect because the contribution margin ratio represents the percentage of revenue that goes towards covering variable costs, not the dollar amount.