# Cost Per Unit Calculator

How much does each of these cost?

## What Is the Cost Per Unit?

A measure of the cost for each unit sold. Fixed costs are spread across all units, thus, for many offerings, the greater the number of units, the lower the average cost.

## Why Is it Important?

• Knowing the average cost per unit will inform manufacturers about the prices that must be earned to achieve profitability.
• As a general rule, the lower the average cost can be driven down, the stronger a business case can be made for moving forward.

## Formula(s) to Calculate Cost Per Unit

• COST PER UNIT = TOTAL COST / NUMBER OF UNITS

## Common Mistakes

• Assuming that costs per unit are stable. It is often the case, whether one is a manufacturer or a buyer, that marginal costs decrease with volume. That is to say, the more items that are involved, the lower the per-unit price.
• Not considering opportunity costs when making decisions based upon per-unit costs.
• Assuming that all units will be sold or purchased.