Cost Concept
Cost is divided into fixed and variable concepts
This means that cost can be fixed and a variable
Total Fixed Cost
Total Fixed Cost (TFC) refers to the total of all costs that do not change with the level of output produced
Formula -: Sum Of All Fixed Cost
Total Fixed Cost Example
Rent for buildings
Salaries of permanent staff
Depreciation of equipment
Total Variable Cost
Total Variable Cost (TVC) includes all costs that change with the level of output. The more you produce, the higher the variable cost.
Formula -: Variable Cost Per Unit x Quantity Of Output Produced
Total Variable Cost Example
Packing Cost
Shipping Cost
Raw Materials
Total Cost
Total Cost (TC) is the sum of fixed and variable costs. It represents the total expense incurred in production at a given level of output.
Formula -: Total Cost = Total Fixed Cost + Total Variable Cost
What role do total variable costs play in pricing strategies?
How does the relationship between total fixed cost and total variable cost affect total cost?
What happens to total fixed cost in the long run?
How do economies of scale impact total variable cost?
How can firms optimize total variable cost to improve efficiency?
keywords
Economies of scale, Marginal cost, Production efficiency, Pricing strategy, Cost structure, Profitability, Business operations.