Unit cost
In one sentenceThe total cost of producing or buying a given quantity divided by its number of units; it is the basis for pricing and inventory valuation.
Simply put
In purchasing it includes the supplier's price and what it takes to get the goods to you: freight, customs and clearance. In manufacturing it includes materials, labor and its share of overhead.
Note: unit cost falls as quantity rises, because fixed costs are spread over more units.
Worked example
A spare parts store imported 4,000 parts for 100,000 SAR and paid freight and customs of 20,000 SAR.
Total cost = 100,000 + 20,000120,000 SAR
Number of units4,000 parts
Cost per part = 120,000 ÷ 4,00030 SAR
Formula: Total cost ÷ Number of units
Don't confuse it with
Marginal costMarginal cost is the cost of one additional unit, while unit cost is the average over the whole quantity.
in FullScreen ERP
Import costs: freight and customs charges are allocated to items. Purchasing and suppliers