Unit cost
Unit cost is what one unit of a product costs you to acquire: the price you pay a supplier, or the materials and labour to make it.
Updated
- Formula
- unit cost = total cost of a batch ÷ units in the batch
- Also called
- cost per unit, product cost
For goods you buy
Divide what you paid by what you received. An order of 400 throws for $7,600 has a unit cost of $19.00. If you count freight and duty in, it is the landed cost of $21.40.
Watch for minimum order quantities and price breaks: the same product can cost $21.40 at 400 units and $19.90 at 1,000.
For goods you make
Add materials, direct labour and the packaging the product is sold in, per unit. A candle with $2.10 of wax and fragrance, a $1.25 jar and lid, and $0.75 of labour has a unit cost of $4.10.
More than one right answer
The same variant can have several defensible unit costs at once: the last price paid, a quote from another supplier, the figure sitting in Shopify, the one in last month’s spreadsheet. Trouble starts when nobody knows which one a report is using.
In Cogsy
Unit cost is the one kind of cost every variant has a place for. Cogsy keeps a unit cost per source, dated, and uses the newest unless you choose a source. Everything else, such as packaging or fees, is added on top as its own line.
Questions
- Is unit cost the same as landed cost?
- Landed cost is the unit cost plus what it took to bring the goods to you. Some stores record the landed figure as their unit cost; others keep freight and duty as separate lines.
- What unit cost do I use when the price changes between orders?
- Either the latest price, or an average weighted by the quantity bought at each price. Pick one method and keep to it.
- Does a product have one unit cost?
- Each variant has its own. A larger size or a different material usually costs a different amount.
Related
Glossary
Landed costLanded cost is what a product costs by the time it reaches your warehouse: purchase price, freight, insurance, duties and handling. Formula and worked example.
Glossary
Cost per itemCost per item is the field where Shopify stores what a variant costs you. What Shopify means by it, what uses it, and what the single field cannot hold.
Glossary
Weighted average costWeighted average cost blends the cost of stock on hand with the cost of new stock, by quantity. The formula, a worked example, and how it compares with FIFO.
Feature
More than one supplierKeep a cost from each supplier, from Shopify and from your imports side by side, and choose which one is active.