AVG COST
Dollars/ Quantity x Goods sold
Average cost is the total cost of production divided by the total number of units produced. It is used by businesses to determine the cost per unit of production.
To calculate the average cost, you need to add up all the costs of production, such as materials, labor, and overhead costs. Then, you divide this total cost by the total number of units produced. The formula for average cost is:
Average Cost = Total Cost of Production / Total Units Produced
For example, let’s say a company produces 100 units of a product and it costs them $1,000 in total to produce those 100 units. The average cost per unit would be:
Average Cost = $1,000 / 100 units
Average Cost = $10 per unit
Therefore, the average cost per unit for the company in this scenario is $10. This information can be useful for the business to set prices, to calculate profits, or to determine the break-even point for the business.
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