Cost Per Unit Calculator

Work out what each unit really costs you to make or buy, including your share of fixed overheads.

Cost per unit formula

Cost per unit = (Total fixed costs + Total variable costs) ÷ Units produced

Example

A workshop spends ₹1,50,000 a month on fixed costs and ₹2,50,000 on materials and direct labour to make 2,000 units. Each unit costs ₹400,000 ÷ 2,000 = ₹200 (₹75 fixed + ₹125 variable). At a selling price of ₹250, profit is ₹50 a unit, a 20% margin.

Why volume lowers unit cost

Variable cost per unit stays roughly constant, but fixed cost is shared across more units as volume rises. Making 4,000 units instead of 2,000 would cut the fixed share from ₹75 to ₹37.50, so unit cost falls to ₹162.50. These are economies of scale. It is also why unit costs rise sharply when production drops.

Using unit cost for pricing

Price above the full unit cost to make a profit over time. In the short term, any price above the variable cost per unit adds a contribution towards fixed costs, which is useful for bulk orders or clearing stock. See the Break-Even Calculator.

Frequently asked questions

Should I include overheads in cost per unit?

For pricing and profitability, yes: allocate overheads so the full cost is visible. For short-term decisions such as accepting a one-off order, the variable cost per unit is often what matters.

What is the difference between unit cost and average cost?

They are the same idea: total cost divided by units. "Marginal cost" is different. It is the cost of producing one more unit, which is usually close to the variable cost per unit.

Results are for planning and information only and are not accounting or financial advice. Check important figures with your accountant.