Total cost is how much money a company spends to make all the stuff it sells. It’s like adding up everything you spend when making lemonade, including things that don’t change (fixed costs), like renting your lemonade stand, and things that do change (variable costs), like buying lemons and sugar.
What’s on This Page?
This page has calculators, easy formulas, step-by-step instructions, examples, and answers to questions about total cost.
Calculator
Total Cost Calculator (from total)
Total Cost Calculator (from average)
Formula
From Total: Total Cost (TC) = Total Fixed Costs (FC) + Total Variable Costs (VC)
From Average: Total Cost (TC) = Average Cost (AC) x Quantity (Q)
- Total Fixed Costs (FC): These are the costs that don’t change regardless of how much you produce. Examples would be rent and administrative salaries.
- Total Variable Costs (VC): These are the costs that change depending on how much is produced. Examples would be hourly manufacturing labor or ingredients.
- Average Cost: The average cost of each unit produced.
- Quantity: The total quantity produced.
How to Calculate Total Cost – Step by Step
From totals method
Step 1 – Find total fixed costs. These are things like rent and salaries that stay the same even if you make no lemonade.
Step 2 – Find total variable costs. These change depending on how many cups of lemonade you make, like lemons and sugar.
Step 3 – Add total fixed costs and total variable costs together to get the total cost.
Example
A bakery has fixed costs (rent and equipment) of $5,000 and variable costs (ingredients and hourly wages) of $3,000. If it makes 1,000 cakes:
Step 1: Fixed costs = $5,000.
Step 2: Variable costs = $3,000.
Step 3: Total Cost = $5,000 + $3,000 = $8,000
From Averages Method
Step 1 – Find the average cost per item.
Step 2 – Find how many items were made (quantity).
Step 3 – Multiply the average cost by the number of items made to find the total cost.
Example
A toy factory makes toys at an average cost of $5 per toy. They make 10,000 toys.
Step 1: Average cost per item = $5
Step 2: Quantity = 10,000
Step 3: Total Cost = $5 x 10,000 = $50,000
Definition – What is total cost?
Total cost is the sum of all the money spent to make products, including costs that stay the same (fixed) and those that change (variable).
Marginal Cost vs. Total Cost
Marginal cost is the cost of making one more item.
Total cost is the full amount spent on making all items.
If a company spends $300,000 making 10,000 toys and $20 more to make one extra toy, the total cost would be $300,020.
Total Revenue vs. Total Cost
Total revenue is the money a company makes from selling everything.
Total cost is the money spent to make all those products.
If total revenue is bigger than total cost, the company makes money. If total cost is bigger, the company loses money.
Average Cost vs. Total Cost
Average cost is how much it costs, on average, to make one item.
Total cost is the overall cost to make all the items.
If you divide the total cost by the number of items made, you get the average cost. If you multiply the average cost by the number of items, you get the total cost.
Tables
Total Cost Table (using Fixed and Variable Costs)
| Total Fixed Costs | Total Variable Costs | Total Cost |
| $100,000 | $50,000 | $150,000 |
| $100,000 | $100,000 | $200,000 |
| $100,000 | $200,000 | $300,000 |
| $200,000 | $50,000 | $250,000 |
| $200,000 | $100,000 | $300,000 |
| $200,000 | $200,000 | $400,000 |
| $500,000 | $100,000 | $600,000 |
| $500,000 | $250,000 | $750,000 |
| $500,000 | $750,000 | $1,250,000 |
| $1,000,000 | $2,000,000 | $3,000,000 |
Total Cost Table (using Average Cost and Quantity Produced)
| Average Cost | Quantity Produced | Total Cost |
| $0.10 | 100,000 | $10,000 |
| $1 | 100,000 | $100,000 |
| $100 | 100,000 | $10,000,000 |
| $500 | 100,000 | $50,000,000 |
| $1,000 | 100,000 | $100,000,000 |
| $0.10 | 500,000 | $50,000 |
| $1 | 500,000 | $500,000 |
| $100 | 500,000 | $50,000,000 |
| $500 | 500,000 | $250,000,000 |
| $1,000 | 500,000 | $500,000,000 |
FAQs
Q: What is a total cost curve?
A: A graph that shows how total cost changes when you make more or fewer things. It starts at fixed costs and goes up as you make more.
Q: Can total cost go down as you make more?
A: Not usually, but if you get a special discount for buying a lot of materials, the total cost might go down a little at that point.
Q: What’s the difference between short-run and long-run total cost?
A: In the short run, some costs (like rent) stay the same. In the long run, most costs can change, so a company can find ways to make production cheaper.
Sources and more resources
- Wikipedia contributors. (2023a, September 25). Total cost. Wikipedia. https://en.wikipedia.org/wiki/Total_cost
- Kacapyr, E., & Redelsheimer, J., & Musgrave, F. Barron’s AP Microeconomics / Macroeconomics (6th ed.). (2018). United States of America: Barron’s. ISBN: 978-1-4380-1065-6. Page 94.
- Pindyck, R., & Rubinfeld, D., Microeconomics (8th ed.), (2013). United States of America: Pearson. ISBN 13: 978-0-13-285712-3. Page 233.
- Nicholson, W., & Snyder, C. Microeconomic Theory – Basic Principles and Extensions (10th ed.). (2008). United States of America: Thomas South-Western. ISBN 13: 978-0-324-42162-0. Page 324.
- Greenlaw, S., & Shapiro, D., Principles of Microeconomics 2e. (2018). Houston: Rice University OpenStax. ISBN 13: 978-1-947172-35-7. Page 197.