## Definition of Fixed Cost per Unit

Fixed costs such as rent, salaries, depreciation, etc. generally *do not change in total* within a reasonable range of volume or activity.

On the other hand, the fixed cost *per unit will change* as volume or the level of activity changes.

## Example of Fixed Costs per Unit

Assume that a company has two fixed costs: rent is $2,500 per month and salaries are $3,500 per month. The *total fixed costs of $6,000* per month will not change when the volume is within the range of 3,000 units to 4,000 units per month.

However, the fixed cost *per unit* will change with any change in volume. For example, if the volume is 3,000 units, the fixed cost per unit will be $2.00 ($6,000 of fixed costs divided by 3,000 units). If the volume is 4,000 units, the fixed cost per unit will be $1.50 ($6,000 of fixed costs divided by 4,000 units).