Enter the total avoidable costs ($) and the number of units into the Calculator. The calculator will evaluate the Avoidable Cost Per Unit.
Avoidable Cost Per Unit Formula
AVCU = AVC / U
Variables:
- AVCU is the Avoidable Cost Per Unit ($/unit)
- ACV is the total avoidable costs ($)
- U is the number of units
To calculate Avoidable Cost Per Unit, divide the total avoidable costs by the number of units.
How to Calculate Avoidable Cost Per Unit?
The following steps outline how to calculate the Avoidable Cost Per Unit.
- First, determine the total avoidable costs ($).
- Next, determine the number of units.
- Next, gather the formula from above = AVCU = AVC / U.
- Finally, calculate the Avoidable Cost Per Unit.
- After inserting the variables and calculating the result, check your answer with the calculator above.
Example Problem :
Use the following variables as an example problem to test your knowledge.
total avoidable costs ($) = 1000
number of units = 300
FAQ – Avoidable Cost Per Unit
What is an avoidable cost?
Avoidable costs are expenses that can be eliminated if a particular decision is made. They are directly associated with specific activities or decisions and would not be incurred if the activity or decision is not undertaken.
Why is calculating the Avoidable Cost Per Unit important?
Calculating the Avoidable Cost Per Unit helps businesses understand the direct costs that can be avoided for each unit of product or service. This information is critical for making informed decisions about pricing, production, and budgeting to enhance profitability and efficiency.
Can fixed costs be considered as avoidable costs?
Yes, fixed costs can be considered avoidable if eliminating a product, service, or decision would result in the elimination of these costs. However, it’s important to note that not all fixed costs are avoidable, as some may continue to be incurred regardless of the decision made.
How does the Avoidable Cost Per Unit affect decision-making in businesses?
The Avoidable Cost Per Unit provides valuable insight into the variable costs that can be eliminated on a per-unit basis. This information helps businesses make strategic decisions about discontinuing products, optimizing production processes, or identifying areas for cost reduction. It aids in determining the profitability and viability of specific products or services.
