Contribution Margin per Unit

A contribution margin is the difference between your service or products per unit and your variable costs per unit. For example, let’s say you charge $40 for a shampoo dog wash (this service is one unit). To provide this service you’ll have to cover the cost of water ($2), shampoo (50￠) and electricity for dryers ($1.50). Your contribution margin per unit is the difference between these variable outgoings combined and your incoming fee – $36.