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Cost Per Unit Calculator — Unit Cost of Production

Calculate the cost per unit of a production run from materials, labor, variable overhead and fixed costs, split into variable and fixed cost per unit, with a selling price at your target margin.

Units produced

Direct materials

Direct labor

Variable overhead

Fixed costs for the run

Target gross margin

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How it works

Cost per unit = (direct materials + direct labor + variable overhead + fixed costs) ÷ units produced · Variable cost per unit = variable costs ÷ units · Price at target margin = cost per unit ÷ (1 − margin %)

Unit cost is the full cost of making one item: the variable costs that grow with every unit (materials, direct labor, variable overhead) plus a share of fixed costs that stay the same however much you produce. Because fixed costs are spread over more units, the cost per unit falls as volume rises — the table shows that economy of scale. Pricing from the full unit cost ensures each sale covers its share of overhead; the variable cost per unit is the floor for short-term pricing decisions.

Worked example

A run of 500 units uses $2,500 of materials, $1,500 of labor, $500 of variable overhead and $3,000 of fixed costs — $7,500 in total. Cost per unit = 7,500 ÷ 500 = $15.00 ($9.00 variable + $6.00 fixed). For a 40% gross margin the price is $15.00 ÷ 0.60 = $25.00, a 66.67% markup.

Sources: Investopedia — Variable cost · Investopedia — Fixed cost

Frequently asked questions

How do you calculate cost per unit?

Add all production costs for a period or batch — materials, labor, variable overhead and allocated fixed costs — and divide by the number of units produced.

What is the difference between unit cost and variable cost per unit?

Variable cost per unit includes only costs that change with output. Unit cost adds a share of fixed costs. Variable cost is used for break-even and short-term decisions; full unit cost for long-term pricing.

Why does unit cost fall when I produce more?

Fixed costs are shared by more units. Doubling output from 500 to 1,000 units halves the fixed cost in each one, from 6.00 to 3.00 in the example.

How do I set a price from unit cost?

Divide the unit cost by (1 − target margin) for a margin-based price, or multiply by (1 + markup) for a markup-based price. Then check the result against competitors and what customers will pay.

Related calculators

Cost of Goods Sold (COGS) Calculator

Calculate cost of goods sold with the periodic inventory formula — beginning inventory plus net purchases minus ending inventory — and see gross profit, gross margin and inventory turnover.

Cost-Plus Pricing Calculator

Price a product by adding a markup to its fully loaded unit cost — materials, labor and overhead — and see the resulting profit and margin.

Target Profit Margin Price Calculator

Set the selling price that hits your target net profit margin after cost and per-unit operating expenses.

Overhead Rate Calculator

Turn indirect overhead costs into an allocation rate against direct labor or sales, so you can load overhead into every job you price.

Break-Even Calculator

Find the number of units and the revenue you need to cover fixed and variable costs — your break-even point.

Planning estimate only — real prices, fees and results depend on your own costs, platform terms, local taxes and what your market will pay. Check the numbers against your books before you commit to a price or budget.