Unit price
Unit price is the cost per individual item or standard measure, such as price per piece, per pound, or per unit of measure. Unit price forms the basis for most purchase calculations and price comparisons, though it shouldn't be the only factor in supplier selection decisions.
Examples
Price per piece: A connector's unit price is $0.45 each. An order of 10,000 units at this unit price totals $4,500 before any additional charges.
Price per weight: Raw aluminum is priced at $2.50 per pound. A part weighing 3.2 pounds has a material cost of $8.00 at this unit price.
Unit of measure considerations: One supplier quotes fasteners at $45 per hundred (each costs $0.45), while another quotes $425 per thousand (each costs $0.425). Converting to comparable unit prices reveals the second option is actually cheaper.
Definition
Unit price is straightforward but can mislead if used as the sole basis for comparison. Factors beyond unit price affect total cost: minimum order quantities, freight charges, payment terms, quality costs, and service levels all influence actual cost and value.
Unit price comparisons require attention to what's included. One supplier's price might include packaging and freight while another quotes the bare component with separate charges for shipping. Comparing unit prices without understanding inclusions can mislead.
Price breaks typically offer lower unit prices at higher quantities. Understanding the unit price structure helps optimize order quantities and evaluate the total cost impact of volume commitments.
When negotiating, unit price is often the primary focus, but sophisticated procurement looks beyond unit price to total cost elements. A lower unit price that comes with worse quality, longer lead times, or poor service may not deliver better value.
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