What is the Average Buy Price?
Broadly defined, the average buy price of a product when you buy online is the average amount spent in an individual transaction on your product or service that you are buying. You could either calculate it based on the value of the overall purchase value together or frequent basis depending on your purchase model. The period in this case should be considered based on your purchase regularity.
How to calculate the average buy price?
Total Value of purchased orders / Number of orders over a defined period = Average Buy Price
Steps to calculate average buy price
1. Find Total Quantity Bought
First of all, you will need to find the quantity of the thing that you are buying and it will be denoted as Q. Over here, basically represents how much of a good or service you are buying. To give an example, let us say that you are ordering 1,000 earphones from a reputed company online. So here, the quantity of purchase Q is equal to 1,000 and no complicated calculations are needed here.
2. Calculate Total Cost
The second step is to find the total cost of production which is denoted as TC. So in the above-mentioned example, suppose that one earphone costs 500 rupees. So you just need to multiply the total quantity, Q with the cost per earphone. Here, Q is 1,000, and the cost per earphone is 500 so the final value that is Total Cost we get is 500000 rupees.
3. Divide Total Cost by Total Quantity
Finally, you can now calculate the average total cost by a simple formula. The formula for Average buy price is dividing total costs by total quantity that is ATC = TC/Q. This step is quite crucial because we are looking for the average buy price, that is the cost per unit.