Calculation formula of unit variable production cost

Calculation formula of unit variable cost: unit variable cost = unit price-[(total revenue-total expenditure+fixed cost)/sales volume], unit variable cost = unit price-[(profit target+fixed cost)/sales volume], profit target = total revenue-total expenditure = sales volume * (unit price-unit variable cost)-fixed cost. Unit variable cost refers to the average distribution of variable cost contained in unit commodity, that is, the ratio of total variable cost to sales volume.

Brief introduction of unit variable cost

Unit variable cost refers to the average distribution of variable cost contained in unit commodity, that is, the ratio of total variable cost to sales volume. Financially, the division between fixed costs and variable costs generally depends on whether the cost items change with the changes in production and sales. If the cost item increases gradually with the change of production and sales, it is variable cost.

Variable costs generally include raw material costs of products and piece-rate wages of direct workers. Because this part of the cost increase is directly proportional to the output, we should start with reducing the procurement cost of raw materials, make economic batches, and make performance bonuses to mobilize the enthusiasm of workers and improve the yield.

Second, introduce fixed costs.

Fixed costs generally include the fixed wages of direct workers, the wages of production management personnel, rent (or depreciation of self-owned workshops), depreciation of machinery and equipment, and machine maintenance expenses. Because this part of the cost does not increase with the increase of output, and the monthly change is not big, the unit cost decreases with the increase of output.

Function of unit variable cost:

1, insight into cost trends.

Variable cost method can track the influence of different factors on cost changes, reveal the changing trend and development law of costs, and enable enterprises to analyze cost changes more objectively and form dynamic variable cost statements.

2. Improve cost control.

Through the analysis of variable cost method, we can control the analysis cost more effectively, help enterprises improve cost efficiency and truly realize the optimization of enterprise management.

3. Help decision-making.

Variable cost method can provide strong support for various business decisions of enterprises, such as providing decision analysis and coordinating departmental decisions, so as to improve the management level of enterprises.

4. Strengthen project management and control.

Variable cost method can help enterprises to master and adjust the project cost more effectively, track and analyze the project progress and effect more effectively, and help improve the project management level and quality.