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29.Contribution per unit is equal to:  A. Selling price per unit – variable cost per unit  B. Selling cost per unit + variable cost per unit  C. Selling cost per unit x variable cost per unit  D. Selling cost per unit / variable cost per unit

Question

29.Contribution per unit is equal to:  A. Selling price per unit – variable cost per unit  B. Selling cost per unit + variable cost per unit  C. Selling cost per unit x variable cost per unit  D. Selling cost per unit / variable cost per unit

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Solution

The correct answer is A. Contribution per unit is equal to Selling price per unit – variable cost per unit. This is because the contribution margin ratio is a formula that calculates the profitability for individual items that a company makes and sells. Specifically, the contribution margin is used to review the variable costs included in the production cost of an individual item. It is a per-item profit metric, whereas gross margin is a company's total profit metric.

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