• How Do I Calculate Variable Costs?

  • Mar 31 2023
  • Length: 13 mins
  • Podcast

How Do I Calculate Variable Costs?

  • Summary

  • - 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.
            - 
                - 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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