Variable Cost Per Unit

Variable Cost Per Unit

According to costing term  there are two type of cost 

Fixed Cost

Variable cost

Variable cost is a cost that vary according to production of units. Variable cost per unit refers to the cost of production of each unit. If production is low variable cost will be low if higher units production variable will be higher.

Example

If variable cost per unit is Rs.or $ 10  per unit

than Cost of 100 units will be Rs or $ 1000

Formula for Variable cost Calculation

Variable cost per unit = Total variable cost/ Total production units

Example

India ltd company  purchase raw material Rs or $ 10,00,000

and labour cost is Rs or $ 2,00,000

India ltd produce 50000 units from such ram material

Total variable cost:

Ram material  cost Rs. or $10,00,000

Add: Labour cost    Rs or $  2,00,000

Total variable cost Rs or $ 12,00,000

Variable cost per unit = 12,00,000/50000 units

Variable cost per unit is Rs or $ 24

 

 

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