Enter labor, raw materials, electricity, machinery, and overhead costs to instantly calculate cost per unit, gross margin, break-even point, and a full cost breakdown by category.
Free Tool · Cost Per Unit · Margin · Break-Even · Cost Breakdown
Production Run Settings
📦units
💱
$per unit
Leave as 0 to skip margin calculation. Enter your target or actual selling price to see gross margin % and markup %.
① Direct Labor
👷
$
⏱
%% on top of wages
Typical burden rate: 15–30% of wages. Covers payroll taxes, health insurance, and retirement. Use 0 if wages already include all costs.
② Raw Materials
Enter up to 5 material lines. For each: name, quantity used per run, and cost per unit of that material.
③ Electricity
⚡
$
≈
④ Machinery & Equipment
$
Asset cost ÷ useful life (runs). E.g. $48,000 machine ÷ 600 runs = $80/run.
$
Avg. repair, spare parts, and servicing cost per run.
⑤ Other Overhead
$
$
Supervisors, QC, cleaners
$
Packaging, consumables, etc.
Results
Enter costs then hit Calculate
Cost Per Unit
—
Total Manufacturing Cost ÷ Units Produced
Total Mfg. Cost (TMC)
—
this production run
Gross Profit / Unit
—
selling price − CPU
Gross Margin
—
% of selling price
Markup on Cost
—
% above CPU
Break-Even Units
—
to cover fixed costs
Fixed Cost / Unit
—
overhead allocation
Cost Breakdown
LaborMaterialsElectricityMachineryOverhead
Cost Advisory
Detailed Breakdown
Direct Labor
Workers × wage × hours
—
Burden (benefits / taxes)
—
Total labor cost
—
Raw Materials
Total material cost
—
Electricity
kWh × rate
—
Machinery & Equipment
Depreciation + maintenance
—
Other Overhead
Rent + indirect labor + misc.
—
Summary
Total Manufacturing Cost
—
Units produced
—
Cost per unit
—
Selling price per unit
—
Gross profit per unit
—
How Production Cost Per Unit Is Calculated
Total Manufacturing Cost (TMC) is the sum of three components: Direct Materials (raw inputs that become part of the product), Direct Labor (wages of workers directly on the production line, including burden), and Manufacturing Overhead (electricity, machinery, rent, and indirect labor that support but don't directly become the product). Divide TMC by units produced to get cost per unit — the number that drives every pricing and profitability decision.
1 Direct Labor
Multiply workers × hourly wage × hours worked per run. Then add the labor burden rate (typically 15–30%) for payroll taxes, insurance, and benefits. This is the true cost of employing production staff.
Base wages =
Workers × Wage × Hours
With burden:
Labor total =
Base × (1 + burden%)
Example: 5 workers
× $15/hr × 8 hrs × 1.20
= $720 labor cost
2 Raw Materials
For each input material, multiply the quantity used per production run by its unit cost. Sum all material lines. Include direct materials only — items that physically become part of the finished product.
Material line =
Qty per run × Cost/unit
Total materials =
Mat 1 + Mat 2 + ...
Example: 200 kg steel
× $2.50/kg = $500
+ 50 L paint × $4 = $200
= $700 total
3 Overhead
Overhead includes electricity (kWh × rate), machinery depreciation (asset cost ÷ useful life in runs), maintenance, factory rent allocated per run, indirect labor (supervisors, QC), and consumables.
Add all three components for Total Manufacturing Cost (TMC). Divide by units produced for cost per unit. Compare to selling price for gross margin. Fixed cost per unit decreases as production volume increases.
Pro Tip — Fixed vs. Variable Cost Separation Is Critical
Not all production costs move with volume. Variable costs (raw materials, direct labor by hours, electricity) rise proportionally with units produced. Fixed costs (rent, machinery depreciation, salaried indirect labor) stay constant regardless of how many units you make. This distinction matters hugely: if you double production volume, your fixed cost per unit is halved — which is the core economic case for scaling up. Track both separately to understand your break-even point and your contribution margin (selling price minus variable cost per unit).
Example Calculations — 3 Production Scenarios
These worked examples cover three common manufacturing situations across different industries and scales.
Labor $259, materials $850, electricity $9.60, machinery $55, overhead $210. At 500 units, overhead is only $0.54/unit — increasing to 800 units/batch would drop it to $0.34. Healthy 56% margin leaves room for distribution and selling costs.
Labor $2,200, materials $4,200, electricity $49, machinery $420, overhead $1,230. Materials dominate at 52% of TMC — focus cost reduction efforts here first. Fixed overhead per unit ($0.61) would halve at 4,000 units/run.
Overhead diluted to $0.19/unit at 10,000 units — demonstrates the power of volume manufacturing. Labor is only $0.11/unit. Material (resin) is 56% of TMC. At 67% gross margin there is room for sales, logistics, and packaging costs.
Frequently Asked Questions
Cost per unit (CPU) is what it costs you to produce one unit — including all labor, materials, and overhead. The selling price is what you charge your customers. The difference is your gross profit per unit. Gross margin is that profit expressed as a percentage of the selling price. For example, if CPU is $4.00 and you sell at $10.00, your gross profit is $6.00 per unit and your gross margin is 60%. However, gross margin does not include non-production costs like sales commissions, marketing, shipping, or administrative overhead — those are subtracted to arrive at operating profit.
The labor burden rate is the percentage added on top of base wages to cover mandatory and voluntary employment costs: payroll taxes, workers' compensation insurance, health insurance, retirement plan contributions, and paid leave. In the U.S., a typical total burden rate is 20–35% of base wages. A worker earning $20/hour at a 25% burden rate actually costs $25/hour in total employment cost. Always use fully-burdened labor rates — using base wages only understates your true labor cost by 20–35%.
The simplest method is straight-line depreciation based on production runs: Depreciation per run = (Asset purchase price − Salvage value) ÷ Estimated useful life in runs. For example, a $60,000 injection molding machine expected to run 1,200 production batches with a $6,000 salvage value: ($60,000 − $6,000) ÷ 1,200 = $45 per run. Alternatively, use annual straight-line depreciation (cost ÷ useful years) and divide by the number of production runs per year.
Break-even point is the number of units you must sell to cover all your fixed costs — where total revenue equals total costs and profit is exactly zero. Formula: Break-even units = Fixed costs ÷ Contribution margin per unit, where contribution margin = selling price − variable cost per unit. If your break-even is 1,000 units but your market can only support 600, the product will never be profitable at that cost structure and selling price.
This is the principle of economies of scale applied to fixed cost allocation. Fixed costs — rent, machinery depreciation, salaried supervisors — stay constant regardless of how many units you produce. When you produce 500 units and your fixed costs are $500, fixed cost per unit is $1.00. At 2,000 units with the same $500 fixed costs, it drops to $0.25 per unit. Variable costs move proportionally with output. As volume increases, fixed costs get "diluted" across more units, pulling down total cost per unit — which is why high-volume manufacturing can sell at prices smaller operations cannot match.