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How Do I Calculate Variable Costs?
Manage episode 359565423 series 3432707
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- Objective today:
- Unit economics - like individual Lego building blocks that make up the overall profitability picture
- Revenue per unit
- Any cost during making and selling
- Connected to gross margin.
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- Every % is a penny of each $ available to cover overhead
- Concept:
- What makes it improve?
- Increase price
- Decrease variable expense
- Cost of product
- produce in bulk
- cut costs where customers don’t mind (value engineering)
- shipping
- negotiate better rates
- Offer free shipping above threshold
- advertising & commission
- Sell to existing audience
- Partner with other brands to sell to their customer
- Trade-offs
- Sometimes spending more advertising dollars or offering referral or sales commission can accelerate revenues to help cover overhead but decrease our gross margin %
- Key Question + Action
- **What is a unit for you?**
- **What costs do you incur with each creation and sale of every unit?**
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