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# How to determine unit cost

If you’re reading this blog, you already know the importance of considering cost when making purchase decisions. It is intuitive that if two products are comparable, you should buy the one with the lower price. However, if you are only relying on the items looks to determine what is “comparable,” you might be making the wrong choice.

Appealing packaging makes it easy to be distracted by things other than price. Compounding the problem is a lack of consistency in package sizes.  For example, it can be difficult to determine whether the 8 ounce package or 12 ounce package is a better deal.  Instead of guessing, savvy consumers want to know exactly how much product they’re actually getting for their money. This is where unit pricing comes in.

Most grocery stores offer unit pricing right on their tags. The unit cost is normally listed in small print on the shelf’s price tag and is the only price that really matters. It levels the playing field for all of the options and tells you how prices compare based on an equal unit of measurement (pounds, ounces, liters, etc.).

You may not know it, but you're probably already using unit pricing to make purchase decisions. Think about filling up your car with gas. There are two gas stations right next to each other that offer practically identical products. The unit price of gas at the first station is \$2.86 per gallon while the unit price of gas at the station next door is \$2.93 per gallon. Clearly, all else being equal, it would save you money to buy gas as the first station.

Let’s look at another example. Recently, I went to the grocery store to buy almonds. There were a number of choices including name brands, store brands, and no brand (the option to buy in bulk). There were also a number of ways the almonds were packaged: in bags, cans, and jars of all different shapes and sizes. Some of the almonds were on sale. A quick look at the cost per ounce made it clear which option gave me the most almonds for my money. In this case, the sale items were not the best deal, even though that is how it appeared at first glance. In fact, the sale almonds were almost \$2 more per ounce than the regularly priced almonds.

While comparing cost per unit is relatively easy in the grocery store where the number is displayed right on the price tag, it is not always that simple. In fact, you won’t find a unit cost listed for the vast majority of things you purchase outside of the grocery store. Yet comparing unit cost can save you money on many things you buy such as batteries, pet food, and even breath mints! So what’s a consumer to do? The answer is simple: Use a calculator.

Most phones have a calculator function built right in. If you don’t have a calculator on your phone, you probably have one in your junk drawer (I’m not the only one with a junk drawer, right?). Since unit pricing can save you so much money over time, it might even be worth it to buy a small, basic calculator. Once you’ve got a calculator, comparing unit costs is easy.

1. Enter the price of the first item you want to compare.
2. Divide the price by the item’s amount (ounces, pounds, liters, etc.).
3. Hit the equal button and voila! You’ve got your price per unit.
4. Repeat steps 1 through 3 for each of the other products you want to compare. Note: Make sure all items use the same units of measurement (ounces, pounds, liters, etc.).
5. Make a super-smart purchase decision. In a nutshell, unit pricing strips away the packaging and lets you compare almonds to almonds.

When do you use unit pricing? What other factors do you consider when comparison shopping?

Kim McGrigg is the former Manager of Community and Media Relations for MMI.

• The Consumer Federation of America (CFA) is an association of nonprofit consumer organizations that was established in 1968 to advance the consumer interest through research, advocacy, and education. Today, nearly 300 of these groups participate in the federation and govern it through their representatives on the organization's Board of Directors.
• The National Council of Higher Education Resources (NCHER) is the nation’s oldest and largest higher education finance trade association. NCHER’s membership includes state, nonprofit, and for-profit higher education service organizations, including lenders, servicers, guaranty agencies, collection agencies, financial literacy providers, and schools, interested and involved in increasing college access and success. It assists its members in shaping policies governing federal and private student loan and state grant programs on behalf of students, parents, borrowers, and families.

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