## What Is Cost per Unit?

**The cost per unit includes all costs associated with production, delivery, marketing, sales, warehousing, management, etc. per unit of the product.**

**Formula for Cost per Unit:**

**Cost per unit = (Total fixed costs + Total variable costs) / Total units produced**

**Fixed Cost:**

**Fixed costs remain unchanged regardless of the production volume in a period.**

**Components of Fixed Cost:**

**Rent or Lease Payments**: The charge to pay for the assets which the company has either rented or leased for a certain period.**Salaries:**The fixed payment that disburses to the employees on a regular basis.**Insurance Fee:**The routine charge for any insurance service of the company.**Property Tax:**The tax that the company has to pay to the government according to the value of assets.**Interest Payments:**The charge that the business needs to pay on the loan taken by the company. It will become a fixed cost if the interest rate become fixed or the repayment amount is fixed for a period.**Depreciation:**Depreciation cost is the cost to overcome the gradual decrease of asset value over a time period.**Utilities:**It includes all other types of costs which the company has to pay after a time period regularly like electricity, gas, etc bills.

**Variable Cost:**

**Variable costs scale with the production volume or amount.**

**Components of Variable Cost:**

**Direct Material**: The raw materials that the product contains in itself.**Direct Labor:**The wages paid to the workers as per the amount of the unit produced. It is the variable cost when the workers are on a temporary contract which depends on the production volume. For the permanent workers, it will be listed as a fixed cost.**Billable Staff Wages:**Sometimes, the company does pay wages on the billable hours. It can be due to overtime of work or temporary hiring.**Commissions**: In business, to motivate the salespersons, the company pays a commission to them on the sold products.**Production Supplies:**The necessary tools and supplies which vary with the production level like machinery oils.**Shipping Cost:**During the shipping of a product, the company pays the shipping cost which varies with the number of units.

## How to Calculate Cost per Unit in Excel: Step-by-Step Procedure

Here’s a simplified template that we’ll use to determine the cost per unit of a product.

### Step 1 – Make a Template Layout

- Make 2 tables for listing the fixed costs and variable costs.
- Input the quantity of production.
- Make a place to get the result of cost per unit of the product.

### Step 2 – List All Costs and Corresponding Values

- Input the quantity of product manufactured in the time period.
- Input the list of fixed costs and variable costs with their amounts.

### Final Step – Insert Formulas to Calculate Cost per Unit

- Insert this formula into cell
**G6**.

`=F6/$C$4`

- Paste the formula to the other cells by dragging the
**Fill Handle**icon or use the shortcuts**Ctrl + C**and**Ctrl + P**to copy and paste. - Insert this formula into cell
**K6**.

`=J6/$C$4`

- Insert this formula into cell
**G13**to get the total variable cost per unit.

`=SUM(G6:G12)`

- Use this formula in cell
**K13**to get the total fixed cost per unit product.

`=SUM(K6:K12)`

- Insert this formula into the cell C7:

`= G13+K13`

## Things to Remember

You can add new rows in the Fixed Cost and Variable Cost table to insert new costs without changing the formula.

- Right-click on the 13th row on the leftmost button.
- Select the
**I****nsert**option.

- You’ll get a new row above the final sum.
- You can input new values and the rest of the table will be updated automatically.

**Download the Free Template**

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