Cost Unit in Cost Accounting

Cost unit is that unit of measurement which is helpful to classify the cost and measure the cost of products and services. Before measuring the cost, we should determine the cost unit. It should be different according the nature of products and nature of business. You normally see, the vendor of medicine will sell you the medicine in the form of batch of 12 or 20 tablets. These batch is also cost unit. Following are the examples of cost unit.

 1. We measure coal in tonne. So, tonne is the cost unit. One metric ton will be equal to 1000 kgs but our cost unit will be tonne or ton. If you want to buy coal, you buy coal at prices range between Rs 770 and Rs 1,700 a tonne.

2. We know that wall bricks are measured in one thousand. So, cost unit will  thousand bricks. These days, one thousand bricks cost is Rs. 5000.

3. Cost unit of transport service is per ton per km. For example, you have 20 ton product. Transport service provider will take the Rs. 500 per ton per kilometer. It means, you have to pay Rs. 10000 for transferring goods upto one kilometer. If you have to transfer goods for 10 kilometers. You will pay Rs. 100,000.

Cost Unit Vs Unit Cost 

Cost unit is the standard unit for buying minimum quantity of any inventory. Unit cost is the minimum price for  buy any standard unit of any inventory.

Related : Units of Measurements of Inventory