Spread fixed costs over the units you make, add the variable cost per unit, and you have the true cost per unit — the number that tells you whether your price actually covers production.
The example
$10,000 fixed, $6/unit variable, 2,000 units.
| A | B | |
|---|---|---|
| 1 | Item | Value |
| 2 | Fixed / unit | $5.00 |
| 3 | Variable / unit | $6.00 |
| 4 | Total / unit | $11.00 |
The formula
Total cost per unit:
How it works
Fixed costs spread; variable costs stay flat per unit:
- Fixed per unit = total fixed costs ÷ units. This falls as volume rises.
- Variable per unit stays the same no matter the volume.
- Add them for the full cost per unit. Compare to price to see profit per unit.
- Higher volume lowers the fixed share — the heart of economies of scale.
Profit per unit is price − cost per unit; multiply by units for total profit. Watch how the per-unit cost drops as you increase the volume input.
Try it: interactive demo
Set fixed, variable, and units.
Variations
Profit per unit
Versus price:
Total cost
All-in:
Units for a target cost
Solve volume:
Pitfalls & errors
Zero units divides by zero. Guard the volume, or the per-unit cost errors.
Step-fixed costs. Some “fixed” costs jump at higher volumes (a second shift, more space). Model those steps if volume changes a lot.
Variable cost may not be constant. Bulk material discounts lower it at scale — use a tiered cost if so.
Practice workbook
Frequently asked questions
How do I calculate cost per unit in Excel?
Why does cost per unit fall as volume rises?
How many units must I make to hit a target cost?
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