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Determining the unit cost of production is a simple matter of addition and division, using this formula: Cost per Unit = (Fixed Costs + Variable Costs) / Number of Units.
For example, if 5,000 units will cost a company $10,000 to manufacture, then the unit product cost or price per unit, is $2.00 each. In practice, however, things are often more complex.
Combined variable and fixed costs are divided by the number of units produced to determine the unit cost. Say, for example, that you had $45,000 in fixed costs, $25,000 in variable costs, and 3000 ...
You calculate the total cost of production by adding the $40,000 fixed costs to the $20,000 variable costs for a total of $60,000, then divide $60,000 by 30,000 to get the unit cost of $2. What Is ...
A prime cost is the total direct cost of production, including raw materials and labor. Indirect costs, such as utilities, managerial salaries, and delivery costs, are not included in prime costs.
Unit of Production vs. MACRS Methods The modified accelerated cost recovery system (MACRS) is a standard way to depreciate assets for tax purposes. Instead of being dependent on the number of ...