average cost investment & finance definition
- The
average cost of shares of a stock or mutual fund that were bought at different
prices over a period of time.
- In a
manufacturing context, the total amount of costs divided by the number of units
produced.
See average cost in Wall Street Words
A cost amount calculated by dividing the total cost by the units of production. Thus, if a firm produces 10,000 units of output for a total cost of $25,000, the average cost of each unit is $25,000/10,000 units, or $2.50 per unit. Average cost is made up of costs remaining unchanged throughout a range of output and costs varying directly with output. Firms with the lowest average cost in an industry have a competitive advantage in the event of severe competition and price cutting.
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