Feb 23, 2017

Cost per Unit Financial Model

For organizations or individuals that run a manufacturing or retail sales business, you may want to drill down to see how much each unit your are selling costs as a function of all your costs. This is a great way to forecast net profit and margins.



Pricing


The model was designed to be as simple as possible, but still allow user to show all their direct and indirect costs and have 3 scenarios (low, medium, and high) sales volumes. This will drive what price you can sell each unit for and still make a desired margin.

This model assumes the costs you are putting in match the units you are putting in your expected forecast. Remember this is not production units, but rather sales units. If you want to make the model smart enough to auto-calculate unit sales based on the variable costs, that function can be built in, but for the purpose of making something everyone can use generally, this is the format.

See my financial model hourly billing rate for work that you want done to the model. I understand everyone has their specific situations and scenarios they want to evaluate.

Visuals were also added to this so you can see how much profit you are taking away from total sales $'s and how many units you are selling in such a scenario. Additionally, there is a chart to show cost per unit and profit per unit.

My favorite way to drive a suggested selling price is to take all your costs per unit and then determine a given profit % target. As you change the profit % targets, your selling price will adjust. You would then test various margins to see what resulting sale price looks the most reasonable. Or, if you have a target margin you want to hit, the model auto-calculates the selling price per unit to do so.

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