Cost Unit - Accounting Media

Cost Unit

While cost centres assist in ascertaining costs by location, person, equipment, operation or process, cost unit is a unit of product, service or a combination of them in relation to which costs are ascertained or expressed.

The selection of suitable cost unit depends upon several factors, such as, nature of business, process of information, requirements of costing system, etc. but usually relates to the natural unit of the product or service.
For example, in steel and cement industry, the cost unit is ‘tonne’, while in transportation services, the unit may be passenger-kilometre or tonne-km,etc. It may be noted that while the former is a single cost unit, the latter is a composite unit, i.e. a combination of two units.

A few examples of cost units are given below :–
lndustry or product Cost unit
Automobile - Number
Biscuit - Kilogram
Bread - Thousand loaves
Breweries - Barrel
Hospital - Patient day
Hotel Guest-day, guest room, etc.
Power and electricity - Kilowatt-hour
Steel - Tonne