Contribution
How much each unit sold contributes towards covering fixed costs (and then profit).
Formula
Contribution per unit = Selling Price − Variable Cost per unit
Real World
Nike sells a pair of trainers for £120 with variable costs of £45 per pair, giving a contribution of £75 per unit that goes towards covering rent, wages, and ultimately profit.
Exam Focus
Never confuse contribution with profit — contribution ignores fixed costs; state this distinction explicitly in 'explain' questions.
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