A unit cost is the total expenditure incurred by a company to produce, store, and sell one unit of a particular product or service. Unit costs are synonymous with the cost of goods sold (COGS).

This accounting measure includes all of the costs, both fixed and variable, associated with the production of a good or service. It’s a crucial measure in the operational analysis of a company. Identifying and analyzing a company’s unit costs is a quick way to check if it is producing a product efficiently. Companies can chart their earnings or losses for products in relation to the volume of sales using a profit-volume chart.