Unit Cost

AAA

DEFINITION of 'Unit Cost'

The cost incurred by a company to produce, store and sell one unit of a particular product. Unit costs include all fixed costs (i.e. plant and equipment) and all variable costs (labor, materials, etc.) involved in production.

INVESTOPEDIA EXPLAINS 'Unit Cost'

Unit cost is an important metric to look at when evaluating a "unit grower" stock, or a stock that chiefly produces items that have a low fixed cost. Generally, the larger a company grows, the lower the unit cost it can achieve through economies of scale.

RELATED TERMS
  1. Economies Of Scale

    The cost advantage that arises with increased output of a product. ...
  2. Productivity And Costs

    An economic data set that measures future inflationary trends ...
  3. Fixed Cost

    A cost that does not change with an increase or decrease in the ...
  4. Variable Cost

    A corporate expense that varies with production output. Variable ...
  5. Incremental Cost

    The encompassing change that a company experiences within its ...
  6. Cost Of Goods Sold - COGS

    The direct costs attributable to the production of the goods ...
RELATED FAQS
  1. How does volume relate to economies of scale?

    An economy of scale is the cost advantage that a company has with the increased size of output of a good or service. There ... Read Full Answer >>
  2. What is the relationship between research and development and innovation?

    Although it's possible to achieve innovation without research and development and it's possible to conduct research and development ... Read Full Answer >>
  3. How is minimum transfer price calculated?

    A company that transfers goods between multiple divisions needs to establish a transfer price so that each division can track ... Read Full Answer >>
  4. How does neoclassical economics relate to neoliberalism?

    While it may be likely that many neoliberal thinkers endorse the use of (or even emphasize) neoclassical economics, the two ... Read Full Answer >>
  5. What are common concepts and techniques of managerial accounting?

    The common concepts and techniques of managerial accounting are all the concepts and techniques that surround planning and ... Read Full Answer >>
  6. How is abatement cost accounted for on financial statements?

    Abatement costs are accounted for on a company's financial statements through increases in either cost of goods sold or operational ... Read Full Answer >>
Related Articles
  1. Economics

    Economics Basics

    Learn economics principles such as the relationship of supply and demand, elasticity, utility, and more!
  2. Fundamental Analysis

    Measuring Company Efficiency

    Three useful indicators for measuring a retail company's efficiency are its inventory turnaround times, its receivables and its collection period.
  3. Forex Education

    Understanding The Income Statement

    Learn how to use revenue and expenses, among other factors, to break down and analyze a company.
  4. Economics

    Calculating Income Elasticity of Demand

    Income elasticity of demand is a measure of how consumer demand changes when income changes.
  5. Economics

    Understanding Implicit Costs

    An implicit cost is any cost associated with not taking a certain action.
  6. Economics

    Understanding Diseconomies of Scale

    Diseconomies of scale is the point where a business no longer experiences decreasing costs per unit of output.
  7. Economics

    What Does Capital Intensive Mean?

    Capital intensive refers to a business or industry that requires a substantial amount of money or financial resources to engage in its specific business.
  8. Economics

    What is an Original Equipment Manufacturer (OEM)?

    An OEM is a company whose products are used as components in another company's product.
  9. Economics

    Good Economic News The Cynics May Be Missing

    Headline data about the U.S. economy hasn’t been great, but the economy is actually stronger than it’s getting credit for.
  10. Fundamental Analysis

    How Does Sampling Work?

    Sampling is a term used in statistics that describes methods of selecting a pre-defined representative number of data from a larger data population.

You May Also Like

Hot Definitions
  1. Social Security

    A United States federal program of social insurance and benefits developed in 1935. The Social Security program's benefits ...
  2. American Dream

    The belief that anyone, regardless of where they were born or what class they were born into, can attain their own version ...
  3. Multicurrency Note Facility

    A credit facility that finances short- to medium-term Euro notes. Multicurrency note facilities are denominated in many currencies. ...
  4. National Currency

    The currency or legal tender issued by a nation's central bank or monetary authority. The national currency of a nation is ...
  5. Treasury Yield

    The return on investment, expressed as a percentage, on the debt obligations of the U.S. government. Treasuries are considered ...
  6. Bund

    A bond issued by Germany's federal government, or the German word for "bond." Bunds are the German equivalent of U.S. Treasury ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!