1. What is Unit Contribution Margin?

The Unit Contribution Margin (Unit CM) is the amount each unit sold contributes to covering fixed costs and generating profit. It's calculated by subtracting the variable cost per unit from the selling price per unit.

2. How Does the Calculator Work?

The calculator uses the Unit Contribution Margin formula:

Where:

• \( \text{Selling Price} \) — Price at which the product is sold (USD/unit)
• \( \text{Variable Cost per Unit} \) — Costs that vary with production volume (USD/unit)

Explanation: The difference between selling price and variable cost shows how much each unit contributes to fixed costs and profit.

3. Importance of Unit Contribution Margin

Details: Unit CM is crucial for break-even analysis, pricing decisions, and understanding profitability at different sales volumes. It helps determine how many units need to be sold to cover fixed costs.

4. Using the Calculator

Tips: Enter selling price and variable cost per unit in USD. Both values must be non-negative numbers.

5. Frequently Asked Questions (FAQ)

Q1: What's the difference between contribution margin and gross margin?
A: Contribution margin considers only variable costs, while gross margin includes both variable and fixed production costs.

Q2: Can contribution margin be negative?
A: Yes, if variable costs exceed selling price, indicating each sale loses money.

Q3: How is this different from profit?
A: Unit CM shows contribution per unit before fixed costs; profit is what remains after all costs.

Q4: What are typical variable costs?
A: Includes direct materials, direct labor, and variable overhead like packaging and shipping.

Q5: How is this used in business decisions?
A: Helps evaluate product profitability, set prices, and decide whether to continue/discontinue products.