Required contribution per unit is calculated as

Required contribution per unit is calculated as

• A. (Fixed costs + required profit) / sales volume
• B. Contribution per unit × sales volume
• C. Selling price per unit × sales volume
• D. (Fixed costs + required profit) / selling price per unit

Answer: (A)

To plan how much each unit must contribute, you first determine the total contribution needed to cover fixed costs and achieve the target profit, and then spread that amount over the expected sales volume. The total required contribution is fixed costs plus the required profit. Dividing that by the number of units you expect to sell gives the amount of contribution each unit must provide: required contribution per unit = (fixed costs + required profit) / expected sales volume. For example, if fixed costs are 10,000 and the target profit is 5,000, with an expected volume of 2,000 units, the total contribution required is 15,000, so each unit must contribute 15,000 / 2,000 = 7.50. This differs from the other ideas: total contribution would be the numerator only, total revenue would be selling price times volume, and dividing by selling price would give a unit count rather than a per-unit contribution.

To plan how much each unit must contribute, you first determine the total contribution needed to cover fixed costs and achieve the target profit, and then spread that amount over the expected sales volume. The total required contribution is fixed costs plus the required profit. Dividing that by the number of units you expect to sell gives the amount of contribution each unit must provide: required contribution per unit = (fixed costs + required profit) / expected sales volume.

For example, if fixed costs are 10,000 and the target profit is 5,000, with an expected volume of 2,000 units, the total contribution required is 15,000, so each unit must contribute 15,000 / 2,000 = 7.50.

This differs from the other ideas: total contribution would be the numerator only, total revenue would be selling price times volume, and dividing by selling price would give a unit count rather than a per-unit contribution.