Unit Cost

What is unit cost?

Unit cost is the amount of money spent on producing a single unit of a product or service. It represents the total fixed and variable costs associated with producing one unit, divided by the number of units produced.

How unit cost is calculated?

Unit cost is generally calculated by adding together all costs required to produce one item, including labor, materials, overhead, transportation, taxes and any other related expenses. Once this figure has been calculated, it can be divided by the number of units produced to give an average unit cost. Unit cost plays an important role in helping businesses to determine the profitability of their operations and understand the impact of various changes on their bottom line.