What is the variable production cost per unit?
To determine the variable production cost per unit, you need to divide the total variable production cost by the total number of units produced.
The variable production costs are expenses that vary directly with the production output, such as raw materials, labor, and utilities. It excludes fixed costs, which are expenses that do not change regardless of the production level (e.g., rent, insurance).
To calculate the variable production cost per unit, follow these steps:
1. Determine the total variable production costs:
Add up all the variable costs associated with production, such as raw material costs, labor expenses, and utility costs. These costs may be obtained from the company's financial records or by conducting a detailed analysis of cost breakdowns.
2. Determine the total number of units produced:
Identify the total quantity of units produced during the given period. This information can be obtained from production records or sales reports.
3. Divide the total variable production costs by the total number of units produced:
Divide the total variable production costs by the total number of units produced to get the variable production cost per unit.
Variable Production Cost per Unit = Total Variable Production Costs ÷ Total Number of Units Produced
By following these steps, you can calculate the variable production cost per unit for a particular production period.