How to Calculate Total Variable Cost
Total variable cost equals total cost minus fixed cost: VC = TC − FC, which also equals average variable cost times quantity.
The Total Variable Cost formula
Calculator
Enter total cost, fixed cost and quantity to split out total variable cost and the AVC behind it.
All spending at this output level, fixed plus variable.
The part owed whether or not the firm produces anything.
Output the cost figures belong to.
Stripping fixed cost out of total cost leaves $1,500 of spending that only exists because the firm is producing.
- Average variable cost (AVC)
- $15
- Sum of marginal costs to Q
- $1,500
- Average total cost (ATC)
- $20
- Variable share of total cost
- 75%
Variable cost works out to $15 per unit, the figure a price has to beat for the firm to keep operating.
Adding up the marginal cost of every unit from the first to the last gives the same $1,500, since fixed cost never enters MC.
Cost per unit is $20, which is AVC plus $5 of average fixed cost.
75% of total cost moves with output, so that share disappears if the firm stops producing.
How to calculate Total Variable Cost, step by step
- 1List the costs that move with output. Hourly wages, raw materials, shipping, and any input the firm buys more of when it produces more.
- 2Subtract fixed cost from total cost. VC = TC − FC whenever a cost table gives you the totals.
- 3Or multiply the average by quantity. VC = AVC × Q when the problem gives you per-unit variable cost instead.
- 4Check the zero-output case. Variable cost is zero when the firm produces nothing, so the VC curve starts at the origin.
Worked example: Total Variable Cost
A firm's total cost is $2,000 at 100 units and its fixed cost is $500, so VC = 2,000 − 500 = $1,500 and AVC = 1,500 ÷ 100 = $15 per unit. If marginal cost held steady at $15 across that range, the marginal costs would also sum to 100 × 15 = $1,500.
Total Variable Cost questions
Is labor a fixed or a variable cost?
Usually variable, since a firm buys more hours to produce more; a salaried manager on a fixed contract counts as a fixed cost in the short run.
Why does variable cost drive the shutdown decision?
A firm keeps operating only if total revenue covers total variable cost, because fixed cost is owed whether it produces or not.
What is the difference between total variable cost and marginal cost?
Total variable cost is the running total of variable spending at a given output; marginal cost is what one more unit adds to that total.
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