Composite cost unit
Composite cost unit is a two-part measure — such as cost per tonne-kilometre or per patient-day — used to cost a service where a single output unit alone would be meaningless.
See it move
A composite cost unit multiplies two measures rather than adding them: a delivery moving 8 tonnes over 25 kilometres represents 8 times 25, or 200, tonne-kilometres. At a rate of €54,000 total monthly cost divided by 45,000 tonne-kilometres, or €1.20 per tonne-kilometre, that delivery costs 200 times €1.20, or €240.
The formula
Variables
- Cost per composite unit (€)
- Total cost (€)
- Quantity measure, e.g. tonnes or patients (varies)
- Distance or time measure, e.g. kilometres or days (varies)
Spreads total cost over the combined composite output actually delivered, such as tonnes carried times kilometres travelled.
Check yourself
A hospital ward incurs total costs of €96,000 in a month and provides 800 patient-days of care in total (number of patients multiplied by the days each stayed). What is the cost attributable to a patient who stayed 5 days?