What Is Variable Cost Per Unit?

The unit variable cost refers to the average apportioned amount of variable costs contained in a unit product, that is, the ratio of total variable costs to sales volume.

Unit variable cost

Right!

The unit variable cost refers to the average apportioned amount of variable costs contained in a unit product, that is, the ratio of total variable costs to sales volume.

Chinese name

Unit variable cost

Definition

The ratio of total variable costs to sales.

Positioning

Variable cost average apportionment

Change

Unit commodity

unit

The impact of unit variable costs on profits:

The unit variable cost in this enterprise refers to the material cost of a unit product. Therefore, the analysis of the impact of unit variable cost rise and fall on profit is actually an analysis of the effect of the rise and fall of raw material cost (price) of the enterprise on profit. ^[1]

1. The impact of increased unit variable costs on profits.

(1) Unit variable cost is increased by 1%:

Realizable profit = [191.99- (151 + 151 × 1%)] × 150000-1473012

= [191.99-152.51] × 150000-1473012

= 39.48 × 150000-1473012

= 5922000-1473012

= 4448988 (yuan)

Profit decrease = 4675488-4448988 = 226500 (yuan)

Profit reduction percentage = 226500 ÷ 4675488 = 4.84%

The unit variable cost increased by 1 percentage point, the profit decreased by 4,84 percentage points, and the reduction was 225,500 yuan.

(2) 5% increase in unit variable cost:

Realizable profit = [191.99- (151 + 151 × 5%)] × 150000-1473012

= [191.99-158.55] × 150000-1473012

= 33.44 × 150000-1473012

= 5016000-1473012

= 3542988 (yuan)

Profit decrease = 4675488-3542988 = 1132500 (yuan)

Profit reduction percentage = 1132500 ÷ 4675488 = 24.22%

The unit variable cost increased by 5 percentage points, and the profit decreased by 24.22 percentage points (or 5 × 4.84 = 24.2), a decrease of 1132500 yuan.

(3) 10% increase in unit variable cost:

Realizable profit = [191.99- (151 + 151 × 10%)] × 150000-1473012

= [191.99-166.1] × 150000-1473012

= 25.89 × 150000-1473012

= 3883500-1473012

= 2410488 (yuan)

Profit decrease = 4675488-2410488 = 2265000 (yuan)

Profit reduction percentage = 2265000 ÷ 4675488 = 48.44%

When the unit variable cost increased by 10 percentage points, the profit decreased by 48.44 percentage points (or: 10 × 4.844 = 48.44), and the reduction was 2265,000 yuan.

(4) 15% increase in unit variable cost:

Realizable profit = [191.99- (151 + 151 × 15%)] × 150000-1473012

= [191.99-173.65] × 150000-1473012

= 2751000-1473012

= 1277988 (yuan)

Profit decrease = 4675488-1277988 = 3397500 (yuan)

Profit reduction percentage = 3397500 ÷ 4675488 = 72.67%

When the unit variable cost is increased by 15%, the profit decreases by 72,67 percentage points, and the reduction is 3397500 yuan.

(5) The unit variable cost increases, and the company's bearing capacity:

Assume that the unit variable cost increases, and the company's bearing capacity is x, that is, the profit = 0

[191.99- (151 / 10151x)] × 150000-1473012 = 0

[40.99-151x] × 150000 = 1473012

6148500-22650000x = 1473012

22650000x = 4675488

x = 20.64%

Once the price of materials exceeds 20.64%, the company cannot bear it, and the performance is that the product is a loss-making product. In fact, even if the price of materials is increased by 15%, it is difficult for the company to bear, because the profit is reduced by 72.67%.

2. The impact of reduced unit cost on profits.

(1) Unit variable cost is reduced by 1%:

Realizable profit = [191.99- (151-151 × 1%)] × 150000-1473012

= [191.99-149.49] × 150000-1473012

= 42, 5 × 150000-1473012

= 6375000-1473012

= 4901988 (yuan)

Profit increase = 4901988-4675488 = 226500 (yuan)

Profit increase percentage = 226500 ÷ 4675488 = 4.84%

When the unit variable cost is reduced by 1 percentage point, the profit increases by 4.84 percentage points, the increase is 226,500 yuan, and the sensitivity level is 1: 4.84.

(2) 5% reduction in unit variable cost:

Realizable profit = [191.99- (151-151 × 5%)] × 150000-1473012

= [191.99-143.45] × 150000-1473012

= 48.54 × 150000-1473012

= 7281000-1473012

= 5807988 (yuan)

Profit increase = 5807988-4675488 = 1132500 (yuan)

Profit increase percentage = 1132500 ÷ 4675488 = 24.22%

Or: 4.84 × 5 = 24.2

When the unit variable cost was reduced by 5 percentage points, the unit's marginal contribution was 48.54 yuan, and the profit increased by 24.22 percentage points, an increase of 113,2500 yuan. Other schemes and so on. Therefore, controlling material consumption and reducing material costs are of great significance in enterprises.