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GCSE Business · key term
The average cost of producing one item, calculated by dividing total costs by the number of units produced.
Used by AQA
Paper 1, Paper 2
Revise: Economies, Diseconomies and Average Unit CostsAverage unit cost includes both fixed costs, such as rent, and variable costs, such as materials. Fixed costs do not change with output within a given range; variable costs change as output changes.
Explain the chain of effects: for example, larger orders → bulk discounts → cheaper materials per item → lower average unit cost.
Distinguish total cost from average unit cost. Total costs can rise while the cost per item falls.
When calculating average unit cost, include both fixed and variable costs in total costs and use output from the same period.
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