What is average variable cost?

Average variable cost is your total variable cost divided by the number of units produced. It measures the cost of the inputs that rise and fall with output, such as raw materials, packaging and hourly wages, expressed per unit.

How is it different from average fixed cost?

Average variable cost covers inputs that change with output, so the total climbs as you make more. Average fixed cost covers overheads that stay the same, so its per-unit figure falls as output rises. Add the two together to get average total cost.

Does average variable cost stay flat?

Not always. It can dip as you gain buying power or efficiency, then rise again if you push past capacity and pay for overtime or rush materials. This calculator gives the simple average for the volume you enter, not a full cost curve.

Average Variable Cost Calculator

This average variable cost calculator works out how much each unit costs in inputs that rise and fall with output. You enter your total variable costs for the period, the expenses that scale with how much you produce, such as raw materials, packaging, freight, power used on the line and hourly or piece-rate wages, then the number of units you made. The tool divides total variable cost by the number of units to give the average variable cost per unit. Unlike fixed overheads, the variable total grows as you make more, so the per-unit figure tends to stay closer to flat, though it can dip as you gain buying power and efficiency, or climb again if you push past capacity and pay overtime or rush prices. Owners, managers and students use average variable cost to set a floor price, to work out contribution margin, and to see whether an extra order is worth taking. A few habits keep the number reliable: match the variable costs and the output to the same period, include only costs that genuinely move with volume, and keep true overheads such as rent and salaries out of this figure, since those belong in average fixed cost. Add average variable cost to average fixed cost to get average total cost, and pair it with break-even and contribution margin for the full picture.

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Total variable costs ($)

Units produced

$18.00

average variable cost per unit

Total variable cost$36,000

Units produced2,000

Average variable cost = total variable costs / units produced. Keep fixed overheads out of this figure. Estimate only, not financial advice.

How it works

Add up every cost that changes with how many units you make over the period, such as materials, packaging, freight and hourly wages. Divide that total variable cost by the number of units produced. The result is the average variable cost, the part of each unit's cost that scales with output. Because the total rises with volume, this per-unit figure is usually steadier than average fixed cost, which falls as output grows.

Worked example

Your variable costs for the month are $36,000 in materials, packaging and hourly labour, and you produce 2,000 units. Dividing $36,000 by 2,000 gives an average variable cost of $18.00 per unit. If your selling price is $30, the contribution margin per unit is $30 less $18, or $12, which is what each unit puts towards fixed costs and profit before overheads are counted.

Related calculators

Average Fixed Cost Calculator: fixed cost per unit.
Break Even Calculator: units needed to cover costs.
Contribution Margin Calculator: price less variable cost.
Gross Profit Calculator: revenue less cost of goods.
Unit Price Calculator: price per unit or measure.

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