Your ‘Fixed Costs’ are the costs that remain the same regardless of how many units you are making. For example:
- Rental of your business premises
- Your insurance
The first thing you need to do is to work out your overall ‘Fixed Costs’ and then your ‘Fixed Cost Per Unit’.
It’s really important that you don’t forget to include ALL costs involved with making your product. For example:
- PROMOTIONAL COSTS: getting business cards or posters etc. printed.
- TRAVEL COSTS: travel time and cost to pick up materials, drop off orders etc.
- OTHER COSTS: costs of telephone calls etc.
Now that you know your overall ‘Fixed Costs’ you need to work out your ‘Fixed Cost Per Unit’. To do this you need to work out how many products you plan to sell.
Remember, this information is available from your Market Research.
Your ‘Fixed Costs’ = 228 euro
You plan to sell 60 units. To get your ‘Fixed Cost Per Unit’:
Divide 228 by 60 = 228 Euro
60 Units = 3.80 euro ‘Fixed Cost Per Unit’.