How to Calculate Variable Cost per Unit

Variable Cost per Unit

A business has costs which are classified as shown below.

1. Direct Labor 40,000 – variable
2. Utilities 22,000 – 80% variable
3. Materials 35,000 – variable

Total Variable Costs

The total variable costs of the business are calculated as follows.

Variable cost = Direct labor + 80% Utilities + Materials
Variable cost = 40,00 + 80% x 22,000 + 35,000
Variable cost = 92,600

Variable Cost per Unit

If the number of units produced in the period is 1,000 then the variable cost per unit is calculated as follows.

Variable cost/unit = Variable cost / Number of units
Variable cost/unit = 92,600 / 1,000
Variable cost/unit = 92.60

Expected Variable Costs

If in the next period the number of units produced is expected to be 1,200 then the expected variable cost is calculated as follows.

Variable cost = Units x Variable cost per unit
Variable cost = 1,200 x 92.60
Variable cost = 111,120

The unit variable cost remains at 92.60 but the total variable cost is expected to rise form 92,600 to 111,120

Find more Questions and Answers

Random questions and answers for you to discover.

March 21, 2017