When it comes to fluctuating costs, it could affect the company's profit margin and the ability to maintain necessary production levels. If the cost of materials drops, then the company can either lower the per unit price to sell more product or take in more profit per unit by keeping the price the same. But if raw material costs go up, then the unit price will have to go up to maintain the product profit margin or profit will have to be sacrificed. The unit cost fluctuates when that demand does