# How to Calculate Fixed Cost per Unit

Fixed cost per unit is calculated by dividing the total fixed costs of business by the number of units. ## Fixed Cost per Unit Example

A business has 86 per unit in variable costs and 120,000 per year in fixed costs. The business operates at a markup of 40%. What is the selling price when demand and production is 1,000 units and 3,000 units.

### Fixed Cost per Unit at 1,000 units

The fixed cost per unit is calculated as follows.

```Fixed costs = 120,000
Units = 1,000
Fixed cost per unit = Fixed costs / Units
Fixed cost per unit = 120,000 / 1,000 = 120 per unit
```

The unit cost at this level of activity is calculated as follows.

```Unit cost = Variable cost + Fixed cost
Unit cost = 86 + 120 = 206
```

The selling price can now be calculated.

```Selling price = Cost x (1 + Markup)
Selling price = 206 x (1 + 40%) = 288.40
```

### Fixed Cost per Unit at 3,000 units

The fixed cost per unit is calculated as follows.

```Fixed costs = 120,000
Units = 3,000
Fixed cost per unit = Fixed costs / Units
Fixed cost per unit = 120,000 / 3,000 = 40 per unit
```

The unit cost at this level of activity is calculated as follows.

```Unit cost = Variable cost + Fixed cost
Unit cost = 86 + 40 = 126
```

The selling price can now be calculated.

```Selling price = Cost x (1 + Markup)
Selling price = 126 x (1 + 40%) = 176.40
```

This example demonstrates the importance of fixed costs and the economies of scale achieved with higher levels of production