What is the unit price?
The unit price is a measurement used to specify the price for certain goods or services that must be exchanged with customers or consumers against money, and it contains fixed costs, variable costs, effort, direct work, and profit margin to support business activities and business activities to support organization are earned.
An average price of products is the result of the distribution of total sales of the product by the total units. When a product is sold in a form such as bottle sizes, the managers must define “comparable” units. The average prices can be calculated by selling prices of different units due to the percentage of sales (MIX) for each product variant if we use a standard instead of a true mix of sizes and products, the resulting price per statistical unit. Statistical units are also referred to as equal units.
The “unit price” tells you the cost per pound, a quarter or other weight unit, or a volume of a food packet. It is usually placed on the shelf under the food. The plank label shows the total price (item price) and price per unit (unit price) for the food product.
Unit price definition
We define the unit price as an amount in which a product or service exchange between the producer, the manufacturer, or service provider is the customer or the consumer of goods or services. It is important for organizations and consumers. An organization could sell sales at lower prices during a consistent time. Similarly, customers would not acquire the product if the observed value is lower than the price.
Marketers that sell the same product in multiple packages, sizes, forms, or configurations at a number of different prices need to know the average price per unit and the price per statistician. Overall average pricing must correctly represent product and price differences, just as they do in studies of different channels. They may lose track of what’s happening to price and why if they don’t have this in place. If, for example, the price of each product variant remained the same, but the mix of volume sold changed, then the average price per unit would vary, but the price per statistical unit would not. They’re both useful for spotting market trends.
Unit price formula
For the unit price formula, we can use two types of formula, and those are:
UNIT PRICE = total price / number of units
Or
UNIT PRICE = profit margin + unit cost
In other words, it’s the cost of creating the finished product at the point where it’s ready for sale or transfer. The key components of the product’s price are:
- Fixed costs. As the name suggests, fixed costs are costs that stay constant throughout time until they reach a certain range or level. There is a tendency for fixed costs to grow if the production level is stagnant. Fixed expenses can come from a variety of sectors, including production, distribution, sales, and advertising, among others.
- Variable costs. As production levels and the number of units produced increase, variable costs tend to increase as well. For a given product, these costs are fixed and grow or decrease in proportion to the unit’s output.
To get at the final price of the product or service, the cost of sales or the entire cost required to make the product accessible for sale is included, as well as a profit share. To the degree that a corporation believes its product will bring value to the consumer’s life, profit is added. Product brand value and sales tactics are only a few variables to consider.
When to use the unit price calculator?
In some countries and in their markets, the price per volume is written on a sticker, and in that case, you do not need this calculator. On the other hand, in most markets and countries, you will not find this information if you pay attention. And that’s why you need this calculator. You can also use it if the units do not match (e.g. price per pound vs price per kilogram) and if you want to compare packages of different sizes, such as cans and bottles. In these cases, this calculator is very useful.
How to calculate the unit price?
You can calculate this using the unit price formula. Divide the total price of an item by the number of units of the item.
UNIT PRICE = total price / number of units
For example, we want to buy 5kg of flour that costs $ 24. You will calculate the unit price as follows:
$ 24.00 / 5kg = $ 4.8 per kg
If you see in addition the same amount of flour 5kg from another manufacturer for a lower price = $ 19
$ 19 / 5kg = $ 3.8 per kg
Using this formula, you will know how to calculate: per ounce per gram per deciliter.
Be careful when buying food in larger quantities on the expiration date, as you may not be able to consume it all until a certain date. If the deadline expires before you use it, the purchase has not paid off.
Calculate unit price for multi-item packages
To calculate packages that contain several pieces, we use a similar formula:
UNIT PRICE = total price / number of items
For example, we compare 2 packets of eggs. The large package contains 30 eggs and costs $ 5. In the middle, there are 18 eggs, which cost $ 3.70. Using the Item mode on our calculator, we can calculate that a pack of 30 eggs is cheaper by $ 0.04 per egg.
To compare packages in which you only know the weight and volume of each item (e.g. a packet of canned beer and a pack of bottled beer), the formula has been slightly modified. The formula will read:
UNIT PRICE = total price / (weight per item * number of items)
A package of 6 beers in a can in which each can contains 0.33l of beer costs $ 13, and the same package in glass costs $ 15.
BEER PACKAGE IN A CAN
$ 13 / (0.33 * 6) = $ 6.57 per liter
BEER PACKAGE IN A JAR
$ 15 / (0.33 * 6) = $ 7.58 per liter
You can use the price per unit calculator to compare many more items, including:
- Bulk vs prepackaged foods
- Loose onions vs a bag of onions
- Tomato sauce in a can vs a jar
- Cans vs bottles of beverages
- Large vs small chocolate bars in packs
- Canned fish vs fresh fish
- And much, much more!
Unit price example
Example 1
The product has the following expenses, and the company wants to earn a profit of 15% over the cost of production. The total number of units produced is 1,000. Find out the total price of the product. The total expenses are 20,000 $, including labor, raw material, and others.
First we need to calculate the total cost per unit.
Cost per Unit = Total Cost / Total Units
= 20,000 $ / 1,000 = 20 $
Since we now know the cost per unit, it is necessary to calculate profit requirements.
Profit Requirement = Total Cost per Unit * Profit Margin
= 20 $ * 15 % = 3 $
Finally, when we know the profit requirement and cost per unit, we can calculate our last step
Price per Unit = Cost per Unit + Profit Requirement
= 20 $ + 3 $ = 23 $
Example 2
You are thirsty, and you have to go to the market to buy water and come in front of the shelf and see two options: the first smaller option is to purchase 1l of water for $ 1, and the second option is to buy 5l of water for $ 3.50. Which is a better option.
Thanks to our price per unit calculator, you know that the price for a smaller package is $ 1 / 1l (or kg, g, ml, etc.), and for a large box, it is $ 0.70 per liter. When we compare two unit prices, we can easily calculate how much we saved compared to the item sold for a higher price. In our case, the savings are $ 0.30 per liter.
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