How To Find Cost Per Unit

Cost per unit is the cost per unit of a product, item or service. It is very important to know that how much cost you charge for each unit cost. If the cost per unit of 5 tables is Rs. 100 (Total Cost = 500) and you sell all of these 5 tables at Rs 120 (5 X 120 = 600), you will get a profit of Rs. 100 (600 - 500). By knowing unit cost of each product, the company can find how much each product cost to the production and efficiently the company uses its resources i.e., maximum output at minimum cost. It is calculated by dividing total costs (both Total of Fixed Costs and Total of Variable Costs) of all units products with total number of unit products.

Mathematically, we can show it as follows:

Cost Per Unit = Total Costs of All Units Products / Total Number of Unit Products

Or

Cost Per Unit  =   Fixed Costs + Variable Costs / Total Units Produced

For Example, if we purchase a set of 5 Chairs, Costing Rs. 100000, then the unit price of a chair is shown below:

Cost Per Unit Of A Chair = 100000 / 5 = Rs. 20000

So, Rs. 20000 is the cost per unit of a chair while total cost = Rs. 20000 X 5 = Rs. 100000.

Example 2: A company has fixed cost of Rs. 3000 and variable cost of R. 5000. The company produced 10 units, then the Cost per unit can be be calculated as shown below:

Cost Per Unit = Total Of Fixed Costs + Total Of Variable Costs / Total Units Produced

Cost Per Unit = 3000 + 5000 / 10 = Rs. 800 Per Unit