LABOUR COSTS PER UNIT:

Question 1

What is labour costs per unit

Answer 1

The average amount an organisation spends on labour per unit of output produced over a period of time

Question 2

What is the formula for working out labour costs per unit

Answer 2

Formula = Total labour costs ÷ total output

Question 3

Interpretation

Answer 3

Clear link to labour productivity - FOR EXAMPLE: The more each member of staff is doing per hour, the more efficient they’re being, which means that the unit costs will go down

If the same number of staff can produce more units, labour costs per unit will fall

If you reduce the staff levels, but keep the level of output the same, then the costs per unit will fall

Falling labour costs per unit mean higher profit margins or the ability to cut the selling price and retain the same profit pargin