In a cost-volume-profit model, the contribution margin per unit is defined as:

• A. Sales price per unit minus fixed cost per unit.
• B. Variable cost per unit minus sales price per unit.
• C. Total revenue minus total costs.
• D. Sales price per unit minus variable cost per unit.

Answer: (D)

The main idea is that the contribution margin per unit shows how much each unit sold contributes to covering fixed costs and generating profit. It’s found by taking the selling price per unit and subtracting the variable cost per unit. This per-unit amount excludes fixed costs, which don’t vary with volume, so they don’t affect the margin on a per-unit basis.

Understanding this helps you see how many units must be sold to cover fixed costs: the contribution margin per unit times quantity equals fixed costs at the break-even point, and any units beyond that add to profit.

The other forms don’t fit because subtracting fixed cost per unit from the price incorrectly ties fixed costs to the per-unit margin, the order of subtracting price and variable cost is reversed, and total revenue minus total costs reflects overall profit rather than the per-unit contribution to fixed costs and profit.