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Unit costs are typically calculated just before a business sets their selling prices for products. Most businesses have a view about the sort of gross profit margins they need to achieve in order to be profitable and financially sustainable. This view may have come from operating a similar business, from government tax information or from industry associations.
Having the unit cost together with the targeted gross profit %, a business is able to calculate the selling price using the formula: Unit Selling Price = Unit cost / (1 – Gross Profit %).
Unit costs would generally be undertaken by an accountant (internal or external) or a business owner who has had previous experience in this field.
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