Unit costs are influenced by various factors, including:
Direct costs: These include expenses directly associated with producing one unit, such as raw materials, labor, and manufacturing overhead.
Indirect costs: Indirect expenses, such as rent, utilities, administrative salaries, and depreciation, also contribute to unit costs.
Production volume: Unit costs often decrease as production volume increases due to economies of scale. Conversely, lower production volumes may lead to higher unit costs.
Efficiency and productivity: Factors like production efficiency, labor productivity, and equipment utilization can affect unit costs.
Quality control: Costs associated with maintaining product quality and compliance standards also impact unit costs.