How is variable cost per unit calculated?

Variable cost per unit is calculated by determining the change in total costs as production levels change, divided by the change in the number of units produced. This formula effectively measures how much the cost varies with the level of output, focusing specifically on variable costs, which fluctuate with production volume. Thus, the correct approach is to take the difference in total costs, which includes variable costs, and the difference in the corresponding level of activity (units produced). This approach allows businesses to analyze their cost behavior and make informed decisions about pricing and production levels based on how costs accumulate as production scales up or down.

The other options do not accurately reflect how to calculate variable cost per unit. For instance, calculating total cost divided by the number of units produced does not distinguish between fixed and variable costs. Similarly, subtracting variable costs from fixed costs does not provide any information about the variable cost per unit. Lastly, dividing estimated manufacturing overhead by fixed costs does not apply since manufacturing overhead can include both fixed and variable components, thus failing to isolate variable costs specifically.