How to Calculate Total Cost
Total cost equals fixed cost plus variable cost: TC = FC + VC. It also equals average total cost times quantity.
The Total Cost formula
Calculator
Enter fixed cost, variable cost per unit and quantity to get total cost and average total cost.
Rent and equipment leases, owed even at zero output.
Materials and labor used up by each unit produced.
How many units the firm builds this period.
Fixed cost plus variable cost is $1,400 at this output level.
- Total variable cost (VC)
- $600
- Average total cost (ATC)
- $28
- Average fixed cost (AFC)
- $16
- Total cost at zero output
- $800
Variable cost per unit times output comes to $600, and it would be zero if the firm produced nothing.
Each unit costs $28 once fixed cost is shared out, so a price above that earns economic profit.
Of that per-unit cost, $16 is fixed cost spread across the units.
Shutting production still leaves $800 owed, which is why the total cost curve starts above the origin.
How to calculate Total Cost, step by step
- 1Add up fixed costs. Costs owed at every output level including zero output: rent, insurance, and salaried staff under contract.
- 2Add up variable costs. Costs that rise with output: hourly wages, raw materials, packaging, and power used in production.
- 3Sum the two. TC = FC + VC at the output level you were given.
- 4Check with the per-unit route. Total cost should also equal ATC × Q, which helps when a problem hands you averages instead of totals.
Worked example: Total Cost
A workshop pays $800 a month for rent and equipment leases and $12 in materials and labor for each chair it builds. Building 50 chairs gives VC = 50 × 12 = $600, so TC = 800 + 600 = $1,400 and ATC = 1,400 ÷ 50 = $28 per chair.
Total Cost questions
What is total cost when output is zero?
It equals fixed cost, because variable cost is zero when nothing is produced. That is why the total cost curve starts above the origin.
How do you get total cost from a marginal cost table?
Start with fixed cost and add the marginal cost of each unit in turn, since MC is the amount each extra unit adds to total cost.
Does total cost include implicit costs?
In economics yes, total cost covers explicit payments plus the opportunity cost of the owner's own resources; accounting statements count only the explicit ones.
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