Calculate variable cost per unit produced — a key metric for pricing and production decisions.
Variable costs change with production volume: raw materials, direct labor, packaging, shipping, commissions. Fixed costs stay the same: rent, salaries, insurance, depreciation.
As long as your selling price exceeds AVC, each additional unit sold contributes to covering fixed costs. Even if you're not yet profitable, selling above AVC is better than not selling at all (this is the "shutdown point" concept in economics).