Cost per unit equals:

Cost per unit equals:

• A. Number of service cost units in the period divided by total costs
• B. Total costs for a period divided by number of service cost units in the period
• C. Total costs for a period minus fixed costs
• D. Variable costs per unit

Answer: (B)

Cost per unit is the average cost of producing or delivering each unit, so you spread all the costs incurred in the period over the number of units (service cost units) that were provided. That means total costs in the period divided by the number of units, which is the presented correct approach. The other ideas don’t fit: dividing in the opposite way would give units per cost, not cost per unit; subtracting fixed costs removes part of the cost per unit; and focusing only on variable costs ignores the fixed costs that are typically allocated across units, unless you’re specifically analyzing variable cost per unit.

Cost per unit is the average cost of producing or delivering each unit, so you spread all the costs incurred in the period over the number of units (service cost units) that were provided. That means total costs in the period divided by the number of units, which is the presented correct approach.

The other ideas don’t fit: dividing in the opposite way would give units per cost, not cost per unit; subtracting fixed costs removes part of the cost per unit; and focusing only on variable costs ignores the fixed costs that are typically allocated across units, unless you’re specifically analyzing variable cost per unit.