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Average cost per unit
Assume that the company expects to produce 15,000 units of the product during the coming year. What average cost per unit and what total cost would you expect the company to incur for direct materials at this level of activity? For fixed manufacturing overhead? Assume that the direct materials is a variable cost.
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- average cost per unit for direct material year1 = raw material used for production / number of units produced year1.
- expected average cost per unit for direct material = average cost per unit year1. - expected total cost = expected average cost per unit for direct material X expected number of unit production. - average cost per unit for fixed manufacturing overhead = fixed costs of manufacturing overhead / number of units produced (whether it is produced or expected to be produced) |
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