Cost unit
A cost unit is the unit of product or service for which a business measures cost, such as a tonne of output, a room-night in a hotel, or a patient-day in a hospital; it must be identified before any cost per unit can be found.
See it move
A cost unit is the unit of product or service a business measures cost against, a tonne-kilometre for a haulage firm. Alderney Transport divides €156,000 of monthly operating costs by 260,000 tonne-kilometres carried, giving €0.60 per tonne-kilometre, so an 8-tonne shipment over 150 kilometres, 1,200 tonne-kilometres, costs about €720.
The formula
Variables
- Total cost (€)
- Number of cost units (cost units)
The cost unit is identified first; total cost is then divided by however many of that unit were produced or delivered in the period.
Check yourself
Meridian Hospitality operates a hotel whose cost unit is the room-night. Total operating costs for the month are €186,000, and the hotel records 3,100 room-nights, rooms occupied, counted per night, during the month. What is the cost per cost unit?