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Cost per unit calculator: the full cost of making or buying one unit
Enter the direct costs for one unit, your overhead for the period and the units you produce or buy. You get the full unit cost and the share overhead adds.
Cost per unit is the direct cost of one unit plus overhead divided by the number of units. At the default numbers each unit costs USD 11.90, with USD 2.40 of that coming from overhead.
Written by Procurement VMS Editorial Team · Reviewed by Michael, Procurement Advisor Expert · Updated
Your numbers
The boxes start with an example so you can see how it works. Replace them with your own figures.
Your result
One unit costs USD 11.90 in full, of which USD 9.50 is direct cost and USD 2.40 is overhead. At this volume the period costs USD 238,000.
| Overhead per unit | USD 2.40 |
|---|---|
| Direct cost per unit | USD 9.50 |
| Full cost per unit | USD 11.90 |
| Total cost for the period | USD 238,000 |
| Overhead as share of unit cost | 20% |
The currency box changes the label only. Enter amounts in the currency you choose.
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- PDF guide with the formula, a worked example and a checklist of what to enter
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The files open with the example numbers from the page. Type yours over the blue cells in the Excel file. The calculator on this page is free to use without a form.
How the cost per unit calculator works
The formula
Cost per unit = materials + labour + packing + freight + (overhead / units).
The full cost per unit is the figure to compare against a supplier quote when you ask whether to make or buy. Direct cost alone flatters in-house production because it leaves out the overhead that production uses.
Overhead per unit depends on volume. Halve the volume and the overhead share doubles. That is why a supplier with a steady order book can often beat your cost even when your direct cost is lower.
The example numbers are illustrative and are not benchmarks. Use your own data for any decision.
How to use it with your own data
- Collect the direct cost for one unit from a recent batch.
- Total the overhead for the period, and use the same period for the unit count.
- Compare the full cost with supplier quotes, delivered to your door. The landed cost calculator helps with imports.
Mistakes that skew the answer
Leaving overhead out
The unit cost will look lower than it is, and make-or-buy decisions will lean toward making.
Allocating overhead on a fixed base
If the product mix changes, a flat overhead rate misstates each unit. Allocate by use where you can.
Mixing periods
Monthly overhead with yearly units gives a figure twelve times too high.
What to do with the result
Take the full cost into the break-even calculator and into the make or buy decision guide. Compare supplier quotes using their landed cost and the total cost of ownership calculator.
Questions about the cost per unit calculator
What is cost per unit?
It is the total cost of producing or buying one unit, including direct costs and a share of overhead.
Should freight be part of unit cost?
Yes, if you pay it. It belongs in the unit cost whether you make or buy.
How do I allocate overhead?
Divide it by the units produced in the same period. For mixed products, allocate by labour hours, machine hours or another driver that reflects use.
How does volume change the cost?
Direct cost stays the same per unit, but overhead per unit falls as volume rises.