ECONOMICS

Detailed explanation-1: -First, add up all of your production costs. Make sure to be clear about which costs are fixed and which ones are variable. Take your total cost of production and subtract your variable costs multiplied by the number of units you produced.

Detailed explanation-2: -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-3: -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.

Detailed explanation-4: -The variable cost ratio is a cost accounting tool used to express a company’s variable production costs as a percentage of its net sales. The ratio is calculated by dividing the variable costs by the net revenues of the company.