Total cost

In economics, total cost (TC) is the total economic cost of production and is made up of variable cost, which varies according to the quantity of a good produced and includes inputs such as labour and raw materials, plus fixed cost, which is independent of the quantity of a good produced and includes inputs that cannot be varied in the short term: fixed costs such as buildings and machinery, including sunk costs if any. Since cost is measured per unit of time, it is a flow variable. In economics, total cost (TC) is the total economic cost of production and is made up of variable cost, which varies according to the quantity of a good produced and includes inputs such as labour and raw materials, plus fixed cost, which is independent of the quantity of a good produced and includes inputs that cannot be varied in the short term: fixed costs such as buildings and machinery, including sunk costs if any. Since cost is measured per unit of time, it is a flow variable. Total cost in economics, unlike in cost accounting, includes the total opportunity cost (implicit cost) of each factor of production as part of its fixed or variable costs. The rate at which total cost changes as the amount produced changes is called marginal cost. This is also known as the marginal unit variable cost. If one assumes that the unit variable cost is constant, as in cost-volume-profit analysis developed and used in cost accounting, then total cost is linear in volume, and given by total cost = fixed cost + unit variable cost × amount of variable input used.