Unit cost

Unit cost is the outlay incurred to produce a single unit of a product or service. Since this outlay is typically comprised of both variable cost and fixed cost elements, the cost for a single unit is derived by compiling the cost of production and dividing by the number of units produced.

A business that competes by being the lowest-cost producer will focus on reducing unit costs below the costs that can be achieved by its competitors.

Related Courses

Accounting for Inventory 
Cost Accounting Fundamentals