How to Calculate Fixed Cost Per Unit in Excel
As a business owner, it is crucial to understand your production costs in order to make informed decisions about pricing and profitability. One important cost to consider is fixed costs, which are expenses that do not vary based on the volume of production. Calculating fixed cost per unit can help you determine the minimum price you need to charge for your products in order to cover your costs and make a profit.
Here’s a step-by-step guide on how to calculate fixed cost per unit using Excel:
Step 1: Open Excel and create a new spreadsheet
To get started, open Microsoft Excel on your computer and create a new spreadsheet. You can do this by clicking on the ‘File’ menu, selecting ‘New’, and then choosing ‘Blank Workbook’.
Step 2: Enter your data
Next, enter your data into the spreadsheet. In order to calculate fixed cost per unit, you will need to know your total fixed costs (TFC) and your total production volume (TPV).
Step 3: Label your columns
Label the first column ‘Units Produced’ and the second column ‘Total Fixed Costs’.
Step 4: Enter your production volume data
In the first column, enter the number of units produced for each production run. For example, if you produced 100 units during your first production run, enter ‘100’ in the first row of the ‘Units Produced’ column. Continue entering data for each production run in subsequent rows.
Step 5: Enter your fixed cost data
In the second column, enter the total fixed costs for each production run. For example, if your total fixed costs for the first production run were $10,000, enter ‘10000’ in the first row of the ‘Total Fixed Costs’ column. Continue entering data for each production run in subsequent rows.
Step 6: Add a third column
Add a third column to your spreadsheet and label it ‘Fixed Cost Per Unit’.
Step 7: Calculate fixed cost per unit
To calculate fixed cost per unit, you will need to use a formula in the third column. In the first row of the ‘Fixed Cost Per Unit’ column, enter the formula: =B2/A2. This will divide the total fixed costs for the first production run by the number of units produced during that run. Copy this formula down the entire column to automatically calculate fixed cost per unit for each production run.
Step 8: Format the spreadsheet
Format the spreadsheet to make it easier to read. You can do this by changing the font size and color, adjusting the column widths, and adding borders to your cells.
Step 9: Save the spreadsheet
Once you have finished entering your data and calculating fixed cost per unit, save your spreadsheet. You can do this by clicking on the ‘File’ menu and selecting ‘Save’. Choose a name and location for your file, and click ‘Save’.
Step 10: Use fixed cost per unit in your business
Now that you have calculated fixed cost per unit for your production runs, you can use this information to make better business decisions. For example, you can use fixed cost per unit to determine your break-even point or to set prices for your products.
Calculating fixed cost per unit can be a valuable tool for businesses of all sizes. By understanding your production costs, you can make informed decisions that will help you achieve profitability and long-term success.