Unit Cost

What is a 'Unit Cost'

A unit cost is 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.

BREAKING DOWN '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. Production Cost

    A cost incurred by a business when manufacturing a good or producing ...
  2. Full Costing

    A managerial accounting method that describes when all fixed ...
  3. Operating Cost

    Expenses associated with the maintenance and administration of ...
  4. Variable Cost

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

    A type of accounting process that aims to capture a company's ...
  6. Fixed Cost

    A cost that does not change with an increase or decrease in the ...
Related Articles
  1. Economics

    Understanding Marginal Cost of Production

    Marginal cost of production is an economics term that refers to the change in production costs resulting from producing one more unit.
  2. Professionals

    Modifying Output

    Modifying Output. Learn the difference between the economic short and long runs.
  3. Professionals

    Break-Even Analysis

    This analysis is used to determine the point at which revenue received equals the costs associated with receiving the revenue
  4. Term

    What is Incremental Cost?

    Incremental cost is the added cost of manufacturing one more unit.
  5. Investing

    What are Fixed Costs?

    Fixed costs are business expenses that do not change as the level of production goes up or down. They are one of two types of business expense, the other being variable costs. Variable costs ...
  6. Forecasting and Modeling Costs

    When we model costs, two important factors need to be taken into account: 1) Distinguish between fixed and variable costs. This is important because fixed and variable costs will not change the ...
  7. Investing

    Variable Costs

    Variable costs go up when a company produces more goods or services, and go down when it produces fewer goods or services. This is compared to fixed costs, which do not change in proportion to ...
  8. Economics

    Understanding Cost of Revenue

    The cost of revenue is the total costs a business incurs to manufacture and deliver a product or service.
  9. Economics

    Explaining Prime Cost

    Prime cost is a way of measuring the total cost of the production inputs needed to create a given output.
  10. Investing

    What are Direct Costs?

    Direct costs for finished goods refer to the items and services directly used in production. Other costs such as rent and insurance for the production site are indirect costs. These costs may ...
RELATED FAQS
  1. How are fixed costs treated in cost accounting?

    Learn how fixed costs and variable costs are used in cost accounting to help a company's management in budgeting and controlling ... Read Answer >>
  2. Is it better for a company to have fixed or variable costs?

    Understand the difference between a fixed cost and a variable cost, and learn how a company benefits from having more fixed ... Read Answer >>
  3. How do fixed and variable costs each affect the marginal cost of production?

    Learn about the marginal cost of production, how to calculate the marginal cost, and how fixed costs and variable costs affect ... Read Answer >>
  4. How is the marginal cost of production used to find an optimum production level?

    Understand more about production cost calculations, and specifically how the marginal cost of production is used to determine ... Read Answer >>
  5. What is the difference between fixed cost and total fixed cost?

    Learn what a fixed cost is, what a variable cost is, what total fixed costs are, and the difference between a fixed cost ... Read Answer >>
  6. What is the difference between variable cost and fixed cost in economics?

    Learn what total costs are comprised of, what variable costs and fixed costs are and what the main difference between fixed ... Read Answer >>
Hot Definitions
  1. Yield Curve

    A line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but differing maturity ...
  2. Stop-Limit Order

    An order placed with a broker that combines the features of stop order with those of a limit order. A stop-limit order will ...
  3. Keynesian Economics

    An economic theory of total spending in the economy and its effects on output and inflation. Keynesian economics was developed ...
  4. Society for Worldwide Interbank Financial Telecommunications ...

    A member-owned cooperative that provides safe and secure financial transactions for its members. Established in 1973, the ...
  5. Generally Accepted Accounting Principles - GAAP

    The common set of accounting principles, standards and procedures that companies use to compile their financial statements. ...
  6. DuPont Analysis

    A method of performance measurement that was started by the DuPont Corporation in the 1920s. With this method, assets are ...
Trading Center