Which formula gives the variable cost per unit?

Which formula gives the variable cost per unit?

• A. Total variable cost / activity level
• B. Total fixed cost / units produced
• C. Variable cost per unit + activity level
• D. Constant cost per unit

Answer: (A)

The thing being calculated is the variable cost per unit, which captures how much cost varies for each unit of output. To get that rate, you divide the total variable cost by the level of activity (for example, the number of units produced). This works because variable costs change in direct proportion to output, so the per-unit amount remains the same for a given cost behavior. Dividing total fixed cost by units produced would give the fixed cost per unit, not the variable portion. Adding the variable cost per unit to the activity level isn’t a meaningful calculation for a per-unit rate. A constant cost per unit isn’t a calculation either and doesn’t reflect how variable costs behave with changes in output.

The thing being calculated is the variable cost per unit, which captures how much cost varies for each unit of output. To get that rate, you divide the total variable cost by the level of activity (for example, the number of units produced). This works because variable costs change in direct proportion to output, so the per-unit amount remains the same for a given cost behavior.

Dividing total fixed cost by units produced would give the fixed cost per unit, not the variable portion. Adding the variable cost per unit to the activity level isn’t a meaningful calculation for a per-unit rate. A constant cost per unit isn’t a calculation either and doesn’t reflect how variable costs behave with changes in output.