Businesses have two primary objectives:
Add together your total direct materials costs, your total direct labor costs and your total manufacturing overhead costs that you incurred during the period to determine your total product costs. Divide your result by the number of products you manufactured during the period to determine your product cost per unit. Using the numbers from the previous examples, add together $15,000, $3,200 and $5,000 to get $23,200 in total product costs. Assume you manufactured 200 bicycles during the same period. Divide $23,200 by $200 to get a product cost per unit of $116.