Cost Per Unit

One of the most important things for a companies success is making a profit on whatever they produce. To make a profit, a company has to consider many of the costs for operation and production. Companies must take an honest look at:

Fixed Costs: expenses that do not respond to change in production output like building rent, depreciation, mortgages, and interest payments. Fixed costs should be pretty constant.

Variable Costs: expenses that changes often depending on production. These include the cost of materials, labor, and shipping for each product.

Determine Unit Costs: (total amount of fixed cost + variable costs) divided by (total number of units produced).
Knowing the unit costs helps companies determine when they will make a profit. Keeping an eye on the numbers and how they affect profit are important to avoid waste.

This video is great at showing cost calculations: