In microeconomics, total cost is the total of all costs to the firm. It’s very helpful to businesses involved in production. Total Costs also aids to calculate the net profit out of Total Revenue.
Total cost involves fixed costs (costs incurred even there is zero production) and variable costs (costs that directly relate to the level of output). To calculate Total cost, consider using Fixed Cost and Variable Cost.
Fixed costs are the costs that have to be incurred even when there is less or no production. It does not depend on the level of production or the number of units sold.
Some examples of fixed costs comprise rent, machinery expense, salaries and wages, insurance premium, and so on which you can use in break-even point calculator. You notice that all the costs on these items do not change even is you increase the production or sales amount per month.
Variable costs are the cost that changes with the output and sales. Therefore, variable costs directly relate to the level of production and sales in the market. Variable costs are the sum of all the marginal costs of the business. Therefore, it also considers as Normal Costs.
Some common examples of variable costs include delivery charges, commission, temporary workers’ wages, production supplies, freights, and so on which you can use in break-even point calculator.
The formula used in the total cost calculator is,
Total Cost = Total Fixed Costs + Total Variable Costs
A company X’s Total Fixed Costs and Total Variable Costs are $1,00,000 and $2,00,000 respectively. Calculate the total costs incurred by the company..