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Supply Chain Glossary - A

Supply Chain Glossary - A

average cost per unit

The estimated total cost, including allocated overhead, to produce a batch of goods divided by the total number of units produced.

In cost accounting, a method of inventory valuation for accounting purposes. A weighted average (based on quantity) of item cost is used to determine the cost of goods sold (income statement) and inventory valuation (balance sheet). Average cost provides a valuation between last in, first out and first in, first out methods. See: first in, first out; last in, first out.

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