Unit Cost

Posted in Operations and Supply Chain Terms, Total Reads: 555

Definition: Unit Cost

The total cost incurred by a company in producing 1 unit of a product is called unit cost. This cost includes production, storage, and cost incurred in selling the product. Unit costs include all fixed and variable costs involved in the production of the product

List of fixed costs:

  • Salaries = a
  • Rent = b
  • Insurance = c
  • Accountancy costs = d

List of variable costs: (per unit of material)

  • Material = x
  • Labor = y
  • Utilities = z
  • Delivery costs = w

Number of units produced = n

Unit cost = (x + y + z + w) + (a + b + c + d)/n

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