# How to Calculate Variable Cost per Unit

## Variable Cost per Unit

A business has costs which are classified as shown below.

1. Direct Labor 40,000 – variable
2. Utilities 22,000 – 80% variable
3. Materials 35,000 – variable

### Total Variable Costs

The total variable costs of the business are calculated as follows.

```Variable cost = Direct labor + 80% Utilities + Materials
Variable cost = 40,00 + 80% x 22,000 + 35,000
Variable cost = 92,600
```

### Variable Cost per Unit

If the number of units produced in the period is 1,000 then the variable cost per unit is calculated as follows.

```Variable cost/unit = Variable cost / Number of units
Variable cost/unit = 92,600 / 1,000
Variable cost/unit = 92.60
```

### Expected Variable Costs

If in the next period the number of units produced is expected to be 1,200 then the expected variable cost is calculated as follows.

```Variable cost = Units x Variable cost per unit
Variable cost = 1,200 x 92.60
Variable cost = 111,120
```

The unit variable cost remains at 92.60 but the total variable cost is expected to rise form 92,600 to 111,120

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How to Calculate Variable Cost per Unit March 21st, 2017