Unit cost
Unit cost is what one unit of output costs. It moves with volume, because fixed costs are spread over more or fewer units.
Unit cost = Variable cost per unit + Fixed costs ÷ Units produced
Why it matters
The same factory has a lower unit cost when it produces more, because rent and fixed costs are shared among more units. Quoting a unit cost without its volume is misleading.
Where it appears in a CFO+ model
- In activities driven by a quantity, such as units, tons, packages or orders.
- In the pricing and margin view, where the price of one unit is set against its cost.
Learn the concept in the Academy
Activities where it shows up
No figures are published: a definition and a formula only.