How is contribution margin per unit calculated?

Contribution margin per unit is calculated by taking the unit selling price and subtracting the variable cost per unit. This calculation provides insight into how much money each unit sold contributes to covering fixed costs and generating profit once the variable costs are accounted for.

Understanding this calculation is essential because it allows businesses to evaluate the profitability of individual products. A higher contribution margin per unit indicates that more revenue is available to contribute towards fixed costs and overall profit after covering variable expenses associated with producing and selling that unit. Therefore, option C accurately reflects this fundamental accounting concept by demonstrating the relationship between revenue from selling a product and the costs directly tied to its production.

The other options do not properly represent how contribution margin is derived or do not include the correct components necessary for its calculation.