How to work out cost per unit
Cost per unit is total cost divided by units made. Work it out for a month, then see why it falls when output rises.
In this room: 3 tasks, 9 questions
- Total cost divided by units4 questions
- What happens when output changes2 questions
- The cost of one table in July3 questions
Cost per unit is the total cost of production divided by the number of units made.
| Cost | Amount |
|---|---|
| Direct materials | 43,000.00 |
| Direct labour | 21,000.00 |
| Indirect costs | 11,000.00 |
The owner uses the cost per unit to set a selling price that covers every cost.
Answer the questions below
3 more questions follow in this task.
The direct costs are variable: £640 for every table. Treat the indirect costs as fixed at £11,000 a month.
In July Fernhill Furniture makes 125 tables.
The variable cost of each table does not change. The fixed costs are spread over more tables.
Answer the questions below
1 more question follows in this task.
July's cost per table is found in the same way as May's: the total cost for July, divided by the 125 tables made in July.
Then compare the two months. They show what a change in output does to the cost of each unit.
Answer the questions below
2 more questions follow in this task.