Financial Glossary
Contribution Margin Per Unit
Contribution margin per unit is the amount each unit sold contributes toward covering fixed costs and generating profit, calculated as the selling price per unit minus the variable cost per unit. It isolates how much of every sale is left over once the direct costs of delivering that sale are removed. Once total contribution margin exceeds fixed costs, the business has reached its break-even point.
Problem & Application
For a campground, contribution margin per unit might be the nightly site rate minus the variable cost of cleaning, utilities, and booking fees tied to that stay. Knowing this number tells an operator how many nights must be booked to cover rent, insurance, and payroll, and how much room exists to discount in the off-season without losing money. It is also the fastest way to spot which revenue lines (sites, cabins, add-ons) actually pull their weight.
In Short
Contribution margin per unit turns pricing and volume decisions into clear math instead of guesswork. It is the foundation of break-even and capacity planning.