Average Cost Price

The average cost price is the average amount or its quantity as the arithmetic average. The total sum of the data given to the total number of data given is defined as average or mean. For average cost pricing, we have the cost of the items and the total number of items or products given. This amount plays an important role in the selling and buying process. In this article, we will find average cost pricing for various items by the help formula and solved examples.

Cost Price Formula

The average cost pricing deals with the summation or arithmetic cost and the number of the quantity or the number of items given. The formula to calculate the average cost is given here. The symbol ∑, called sigma is used for the notation of the summation.

X = ∑(xi)/n

Where,

xi = sum of all costs and

n = total number of items

What is Marginal Cost Pricing?

Marginal cost pricing is the method of fixing the price of a product at or somewhat above the variable cost to produce it. Usually, this pricing is done when the organization is unable to sell the product at a higher price.

It is advantageous in terms of adding profit and to enter into the marketplace. But the disadvantages of using marginal cost is that it cannot be used for long term pricing, it could ignore the market price, which may also lead to losing the customer.

Average Cost Price Examples

Q.1: A person sells different types of bags, every day. He sells a total of 5 bags for the cost 125, 250, 200, 135, 150 rupees. Find the average cost pricing of a bag he sold.

Solution: Given,

Number of bags, n = 5

We know the formula for average cost.

X = ∑(xi)/n

X = (125+250+200+135+150)/5

X = 860/5

Average cost pricing of bag = 172 rupees.

Q. 2: An employee gets wages in a factory which depends upon how he works for the day. For 6 days he gets wages 200, 150, 220, 300, 250, 210 rupees. Find the average cost of his wages.

Solution: Given,

Number of days, n = 6

We know the formula for average cost.

X = ∑(xi)/n

= (100+150+220+300+250+210)/6

= 1230/6

Average cost pricing for day = Rs. 205/-.

Q.3: A shop has different types of clothes and they sell a total of 7 clothes per day for the cost 150, 200, 400, 250, 250, 320, 250 rupees. Find the average cost of the clothes they sell for a day.

Solution: Given,

Number of clothes, n = 7

We know the formula for average cost.

X = ∑(xi)/n

= (250+200+400+250+250+320+250)/7

= 1920/7

Average cost pricing of shoe = Rs. 274.28/-