Average Variable Cost Calculator
Calculate average variable cost per unit from materials, labor and variable overhead, plus contribution margin.
How to calculate average variable cost
Average variable cost (AVC) = total variable cost ÷ quantity produced. Variable costs change with output, such as materials, direct labor and variable overhead. Example: $9,000 of variable costs over 1,000 units gives an AVC of $9.00 per unit. If your price is above AVC, each unit contributes toward covering fixed costs.
Frequently asked questions
What is average variable cost?
The variable cost per unit produced: total variable cost divided by the number of units.
What counts as a variable cost?
Costs that rise and fall with output, such as raw materials, per-unit labor, packaging, shipping and variable utilities. Rent and salaries are fixed costs.
How does AVC relate to pricing?
In the short run a business should keep producing while price is at least equal to AVC. If price falls below AVC, every unit sold loses money even before fixed costs.
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