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Accounting · Definition

Unit Cost

The total cost attributable to producing or acquiring one unit.

Unit cost divides total cost by units produced or purchased. Which costs are included — material only, material plus labour, or fully absorbed with overhead — changes the figure and therefore the decision it supports.

Because fixed costs are spread over volume, unit cost falls as output rises. Comparing unit costs across two periods of different volume without saying so is one of the most common reporting errors there is.

How it is calculated

Unit cost = Total cost ÷ Units produced or purchased

State the basis — direct, absorbed or landed — or the figure is not comparable.

Also called

  • cost per unit

Related terms

Landed Cost

The total cost of a product once it arrives, including freight, duties and fees.

Cost of Goods Sold

COGS

The direct cost of the products a business sold in a period.

Weighted Average Cost

WAC

Valuing stock at the blended average cost of all units held.

Contribution Margin

Revenue minus variable costs — what each sale contributes to fixed costs and profit.

More in Accounting

Accounts Payable (AP) Accounts Receivable (AR) Accrual Accounting Accrued Expense Aging Report Bad Debt Provision Balance Sheet Bank Reconciliation

Unit Cost is not just a definition here

Accounting runs on this vocabulary every day in AWRA OpsHub — 51 of our 257 glossary terms describe things the platform actually does.

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