# Average cost

## Average cost,

### Definition of Average cost:

1. Production cost per unit of output, computed by dividing the total of fixed costs and variable costs by the number of total units produced (total output). Lower average costs are a potent competitive advantage. Also called unit cost. Formula: (Fixed costs + Variable costs) ÷ Total output.

### How to use Average cost in a sentence?

1. Tom sat down with Becky and explained to her that if she had four apples that she sold for \$1.00 a piece and she divided the total cost by the number of apples she would have the Average Cost of the apples.
2. I wondered what the average cost of the item was because that would determine how high I made the price in our business.
3. By lowering the average cost of our product we will be able to still charge the same price and make more money on each sale, thus increasing our profit margins while not risking losing customers due to ballooning costs.

Meaning of Average cost & Average cost Definition