ECONOMICS

Detailed explanation-1: -Variable Cost Formula. To calculate variable costs, multiply what it costs to make one unit of your product by the total number of products you’ve created. This formula looks like this: Total Variable Costs = Cost Per Unit x Total Number of Units.

Detailed explanation-2: -Add all variable costs required to produce one unit together to get the total variable cost for one unit of production. Multiply the variable costs for one unit of product by the total number of units produced. The sum of this calculation will give you the total variable cost.

Detailed explanation-3: -When production or sales increase, variable costs increase; when production or sales decrease, variable costs decrease. Variable costs stand in contrast to fixed costs, which do not change in proportion to production or sales volume.

Detailed explanation-4: -The contribution margin is computed as the selling price per unit, minus the variable cost per unit. Also known as dollar contribution per unit, the measure indicates how a particular product contributes to the overall profit of the company.