# ATC — Average Total Cost

## Average Total Cost Formula | Calculator (Excel template)

Average total cost is basically a cost measure in per unit of output produced by the firm. Sometimes, it is also per unit total cost because of the reason that it is calculated by diving the total cost of production by the number of units produced.

Here’s the Average Total Cost Formula –

Average Total Cost = Total Cost of Production / Number of Units Produced

Here Total cost includes all the costs which are required to produce the goods. It includes both Fixed cost (one time cost which is required to produce the goods but does not change with the output) and Variable cost (per unit cost to produce the goods which change as per the output)

Total cost = Fixed cost + Total variable cost

Average total cost, during the initial stages of production, will be higher and will go down as we increase the number of units produced.

This due to the fact that when a business will start its production, they have to incur certain fixed cost buying machinery, equipment etc. This cost is not related to how many unit businesses is going to produce.

So as the unit produced keeps on increasing, per unit fixed cost will drop so as the average total cost.

### Examples of Average Total Cost Formula (With Excel Template)

Let’s take an example to understand the calculation of Average Total Cost formula in a better manner.

### Average Total Cost Formula – Example #1

Suppose there is an FMCG company which is producing candy for kids. Fixed Cost which they have invested in equipment etc. is \$10,000. Variable cost per pack of candy is \$12. The company is producing 1000 on an average.

Total Variable Cost is calculated using the formula given below

Total Variable Cost = Variable Cost per Pack * Number of Packs

• Total Variable Cost = \$12 * 1000
• Total Variable Cost = \$12000

Total Cost is calculated using the formula given below

Total Cost = Fixed cost + Total Variable Cost

• Total Cost = \$10000 + \$12000
• Total Cost = \$22000

Average Total Cost is calculated using the formula given below

Average Total Cost = Total Cost of Production / Number of Units Produced

• Average Total Cost = \$22000 / 1000
• Average Total Cost = \$22

### Average Total Cost Formula – Example #2

Company ABC Inc.is working in manufacturing/assembling of Cars. So for them, costs Steel, glass screens, number of tires, car seats, engines etc.

all are variable costs because all of these costs will vary as per the number of cars the company is producing. But costs plant, assembly line, equipment, R&D etc.

all are fixed cost since these costs does not have direct linkage with the unit produced.

Total fixed cost is calculated as:

Total fixed cost = \$1,045,000

Total variable cost per car is calculated as:

Total variable cost per car = \$1450

Total variable cost is calculated as:

Total variable cost = \$1,450,000

Total Cost is calculated using the formula given below

Total Cost = Fixed cost + Total Variable Cost

• Total Cost = \$1,045,000 + \$1,450,000
• Total Cost = \$2,495,000

Average Total Cost is calculated using the formula given below

Average Total Cost = Total Cost of Production / Number of Units Produced

• Average Total Cost = \$2,495,000 / 1000
• Average Total Cost = \$2495

Now, if we increase the number of cars, fixed cost will not change and only variation will happen in the variable cost

Total variable cost is calculated as:

Total variable cost = \$2,900,000

Total Cost is calculated using the formula given below

Total Cost = Fixed cost + Total Variable Cost

• Total Cost = \$1,045,000 + \$2,900,000
• Total Cost = \$3,945,000

Average Total Cost is calculated using the formula given below

Average Total Cost = Total Cost of Production / Number of Units Produced

Average Total Cost = \$3,945,000 / 2000

Average Total Cost= \$1973

So if you see here, as we increase the number of cars, the average total cost per car dropped. This is because that fixed cost is now spread over 2000 units and per unit fixed cost is lower as compared to an earlier scenario.

Average Total Cost curve:

For small quantity of output, as explained earlier, the total cost is higher. But as we keep on increasing the quantity, average costs start to decline. But now the catch is that this decline will not continue forever and after a certain level, the average cost starts to increase.

This is because of the concept of diminishing marginal return which states that after some point, adding an additional factor of production will result in a smaller increase in output. This is the reason that Average total cost curve is U Shaped curve.

I will elaborate that will the help of an example:

### Relevance and Uses of Average Total Cost Formula

As explained above, the average total cost will give us an idea of what is the per unit cost a company will incur to produce stipulated number of units of goods.

Also, we have seen that as the production increases, the total cost will drop because of spreading of the same fixed cost over more units now. But due to diminishing marginal return, the variable cost after a particular point will start increasing.

This is because of a decrease in margin productivity and a return of the additional resource we are adding.

The company can use this concept of average total cost to analyze various aspects of their production and can utilize their resources in more efficient manner. Few relevant uses of average total cost formula are :

1. Companies can see what is the optimal point of production for them and what is the level of production which minimize their cost
2. If they need additional fixed cost due to increase in demand etc., companies can analyze what should be production quantity, so that the fixed cost addition will not shoot up their average total cost.
3. Companies can use this concept to plan and increase the capacity of production so that they are utilizing their resource well

### Average Total Cost Formula Calculator

You can use the following Average Total Cost Calculator.

Average Total Cost Formula=
 Total Cost of Production = Number of Units Produced

This has been a guide to Average Total Cost formula. Here we discuss How to Calculate Average Total Cost along with practical examples. We also provide Average Total Cost Calculator with downloadable excel template. You may also look at the following articles to learn more –

Источник: `https://www.educba.com/average-total-cost-formula/`

## Average Total Cost Formula | Step by Step Calculation

The average total cost formula shows the cost per unit of the quantity produced and is calculated by taking two figures where the first one is total production cost and the second one is the quantity produced in numbers and then the total cost of production is divided by the total quantity produced in numbers.

It is straightforward, and it is calculated by dividing the total cost of production by the number of goods produced.

Average Total Cost = Total Cost of Production / Quantity of Units Produced

However, the total cost is comprised of fixed cost and variable cost of production. Mathematically,

Total Cost of Production = Total Fixed Cost + Total Variable Cost

It can also be calculated by adding up average fixed cost and average variable cost. This average total cost equation is represented as follows-

Average Total Cost = Average Fixed Cost + Average Variable Cost

where,

• Average fixed cost = Total fixed cost/ Quantity of units produced
• Average variable cost = Total variable cost/ Quantity of units produced

The formula of the average total cost can be determined by using the following five steps:

• Step 1: Firstly, the fixed cost of production is collected from the profit and loss account. A few examples of the fixed cost of production are depreciation cost, rent expense, selling expense, etc.
• Step 2: Next, the variable cost of production is also collected from the profit and loss account. A few examples of the variable cost of production are raw material cost, labor cost, etc.
• Step 3: Next, the total cost of production is calculated by summing up the total fixed costs and total variable cost. Total Cost of Production = Total Fixed Cost + Total Variable Cost
• Step 4: Now, the quantity of units that has been produced has to be determined.
• Step 5: Finally, the average total cost of production is calculated by dividing the total cost of production calculated in step 3 by the number of units produced determined in step 4. Average Total Cost = Total Cost of Production / Quantity of Units Produced

### Example #1

Let us consider an example where the total fixed cost of production of a company stood at \$1,000, and the variable cost of production is \$4 per unit. Now, let us do the calculation of the average total cost when the quantity of production is:

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• 1,000 units
• 1,500 units
• 3,000 units

In the below template, we have done the calculation of the Total Cost of Production using the given data.

• So the total cost of production at 1,000 units will be calculated as:

So from the above calculation, the Total Cost of Production for 1000 units will be:

= \$1,000 + \$4 * 1,000

Now, at 1,000 units, it will be calculated as:

= \$5,000 / 1,000

• Total Cost of Production for 1500 units

= \$1,000 + \$4 * 1,500

So, for 15000 units it will be –

\$7,000 / 1,500

• Total Cost of Production for 3000 units

= \$1,000 + \$4 * 3,000

So, for 3000 units, it will be –

= \$13,000 / 3,000

In this case, it can be seen that the average total cost decreases with the increase in the production quantity, which is the major inference from the above cost analysis.

### Example #2

Let us consider another example where the total fixed cost of production of a company stood at \$1,500 while the variable cost of production per unit varies with production quantity. Now, let us calculate the average total cost when:

• Variable cost is \$5.00 per unit from 0-500 units
• Variable cost is \$7.50 per unit from 501-1,000 units
• And variable cost is \$9.00 per unit from 1,001-1,500 units

Therefore,

• Total cost of production at 500 units = Total fixed cost + Total variable cost

= \$1,500 + \$5 * 500

For 500 units, it will be = \$4,000 / 500

Again,

• Total cost of production at 1,000 units = Total fixed cost + Total variable cost

= \$1,500 + \$5 * 500 + \$7.5 * 500

At 1,000 units = \$7,750 / 1,000

Again,

• Total cost of production at 1,500 units = Total fixed cost + Total variable cost

= \$1,500 + \$5 * 500 + \$7.5 * 500 + \$9 * 500

At 1,500 units = \$12,250 / 1,500

In this case, it can be seen that the average total cost initially decreases with the increase in the production quantity till 1,000 units. But then the trend reverses beyond that production level due to an increase in the average variable cost. The detailed excel calculation is presented in tabular format in the later section.

### Average Total Cost Calculator

You can use the following  Calculator.

Average Total Cost Formula =
 Total Cost of Production = Quantity of Units Produced

### Use and Relevance

It is vital to understand the concept of average total cost since it helps a production manager to figure out till what level the production can be increased profitably. Usually, the total fixed cost doesn’t change, and as such, the change in average total cost is primarily driven by the change in average variable cost.

In cases where the average total cost breaches the permissible limit, then the production manager should either halt the incremental production or try to negotiate the variable cost.

### Example of Average Total Cost (with Excel template)

The following table gives a detailed calculation of the case discussed in example 2 and shows how the average total cost varies with the change in quantity produced. Here, it reverses trend after a certain point, which indicates that at that level of production, the cost of production starts to increase after the initial phase of moderation.

In the below given excel template, we have used the equation to find the Average Total Cost for certain units produced.

So the Average Total CostCalculation will be:-

The below-given graph shows the Average Total Cost of the Company.

This article has been a guide to the Average Total Cost Formula. Here we learn how to calculate average total cost along with practical examples and downloadable excel templates. You can learn more about accounting from the following articles –

Источник: `https://www.wallstreetmojo.com/average-total-cost-formula/`

## Издержки производства (Costs)

Издержки производства имеют свою классификацию, разделяясь по отношению к тому, как они «ведут себя» при изменении объемов производства. Издержки, относящиеся к разным видам ведут себя по-разному.

Постоянные издержки, как и следует из названия, это совокупность издержек предприятия, которые возникают вне зависимости от объемов производимой продукции. Даже когда предприятие не производит (не продает или не оказывает услуг) вообще ничего.

Для обозначения таких издержек в литературе иногда применяется аббревиатура TFC(time-fixed costs). Иногда применяется и просто — FC (fixed costs).

Примерами таких издержек может быть ежемесячная заработная плата бухгалтера, плата за аренду помещения, плата за землю и т.д.

Следует понимать, что постоянные издержки (TFC) на самом деле, условно-постоянные. В определенной степени, они все равно испытывают влияние объемов производства. Представим себе, что в цехе машиностроительного предприятия установлена система автоматического удаление стружки и отходов.

При увеличении объема выпускаемой продукции, вроде бы, никаких дополнительных расходов не возникает. Но при превышении определенного предела потребуется дополнительная профилактика оборудования, замена отдельных деталей, чистка, устранение текущих неисправностей, которые будут возникать чаще.

Таким образом, в теории, постоянные издержки (расходы) на самом деле, являются такими лишь условно. То есть горизонтальная линия затрат (издержек) в книге, на практике таковой не является. Скажем, что она близка к некоторому постоянному уровню.

Соответственно, на диаграмме (см. ниже) условно такие издержки показаны как горизонтальный график TFC

### Переменные издержки производства (TVC)

Переменные издержки производства, как это следует из названия, это совокупность издержек предприятия, которые прямо зависят от объема произведенной продукции.

В литературе данный вид издержек иногда обозначают аббревиатурой TVC(time-variable costs).

Как следует из названия, «переменные» — значит увеличивающиеся или уменьшающиеся одновременно с изменением объема продукции, выпускаемой производством.

К прямым издержкам относят, например, сырье и материалы, которые входят в состав конечной продукции или расходуются в процессе производства прямо пропорционально его загрузке. Если предприятие выпускает, например, литые заготовки, то расход металла, из которого эти заготовки состоят, будет прямо зависеть от производственной программы.

Для обозначения расходования ресурсов, которые прямо используются на производство изделия, также используют термин «прямые расходы (затраты)». Эти затраты — тоже переменные издержки, но не все, так как это понятие шире. Значительная часть расходов производства непосредственно в состав изделия не входит, но изменяется прямо пропорционально объему производства.

Такими издержками являются, например, затраты на энергоресурсы.

Необходимо учитывать, что ряд затрат на ресурсы, которые использует предприятие необходимо в целях классификации издержек разделять.

Например, электроэнергия, которая используется в нагревательных печах металлургического предприятия относится к переменным издержкам (TVC), а вот другая часть электроэнергии, потребленной тем же самым предприятием на освещение территории завода — уже к постоянным (TFC).

То есть, один и тот же ресурс, который потребило предприятие, может разделяться на части, которые могут классифицироваться по-разному — как переменные или как постоянные издержки.

Есть также ряд издержек, затраты по которым относят к условно-переменным. То есть они связаны с производственными процессами, но прямо пропорциональной зависимости по отношению к объемам производства не имеют.

На диаграмме (см. ниже) переменные издержки производства отображены как график TVC.

Данный график отличается от линейного, которым он должен был бы быть в теории. Дело в том, что при достаточно малых объемах производства, прямые издержки на производство выше, чем должны быть. Например, литейная форма рассчитана на 4 отливки, а Вы производите две. Плавильную печь загружаете ниже проектной мощности.

В результате ресурсов расходуется больше, чем технологический норматив. После преодоления некоторого значения объемов производства график переменных издержек (TVC) становится близким к линейному, но далее, при превышении некоторого значения, издержки (в пересчете на единицу выпуска) снова начинают расти.

Это объясняется тем, что при превышении нормального уровня производственных возможностей предприятия, на выпуск каждой дополнительной единицы продукции требуется тратить больше ресурсов.

Например, оплачивать работникам сверхурочные, тратить больше денег на ремонт оборудования (при нерациональных режимах эксплуатации затраты на ремонт растут геометрически) и т.д.

Таким образом, переменные издержки считают подчиняющимися линейному графику лишь условно, на определенном отрезке, в пределах нормальной производственной мощности предприятия.

### Общие издержки предприятия (TC)

Общие издержки предприятия являются суммой переменных и постоянных издержек. В литературе их часто обозначают как TC (total costs).

То есть
TC = TFC + TVC

где издержки по видам: TC — общие TFC — постоянные

TVC — переменные

На диаграмме общие издержки отражены графиком TC.

### Средние постоянные издержки (AFC)

Средними постоянными издержками называют частное от деления суммы постоянных издержек на единицу выпускаемой продукции. В литературе эту величину обозначают как AFC(average fixed costs)

То есть
AFC = TFC / Q где TFC — постоянные издержки производства (см. выше) Q — количество (объем) производства

Смысл данного показателя заключается в том, что он показывает, сколько постоянных издержек приходится на единицу производимой продукции.

Соответственно, при росте объема производства на каждую единицу изделия приходится все меньшая доля постоянных издержек (AFC).

Соответственно, уменьшение величины постоянных издержек, приходящихся на одну единицу продукции (услуг) предприятия приводит к росту прибыли.

На диаграмме значение показателя AFC отображено соответствующим графиком AFC

### Средние переменные издержки (AVC)

Средними переменными издержками называют частное от деления суммы затрат на производство изделий (услуг) к их количеству (объему). Для их обозначения часто используется аббревиатура AVC (average variable costs).

AVC = TVC / Q где TVC — переменные издержки производства (см. выше) Q — количество (объем) производства

Казалось бы, в расчете на одну единицу продукции, переменные издержки должны быть всегда одинаковы. Однако, по причинам, о которых говорилось ранее (см.

TVC) затраты на производство испытывают колебания в расчете на единицу произведенной продукции.

Поэтому для ориентировочных экономических расчетов принимают во внимание величину средних переменных издержек (AVC) при объемах, близких к нормальной мощности предприятия.

На диаграмме динамика показателя AVC отображена графиком с аналогичным названием

### Средние издержки (ATC)

Средние издержки предприятия — это частное от деления суммы всех издержек предприятия к величине произведенной продукции (работ, услуг). Часто эту величину обозначают как ATC (average total costs). Также встречаются термин «полная себестоимость единицы продукции».

ATC = TC / Q где TC — полные (общие) издержки (см. выше)   Q — количество (объем) производства

Следует учесть, что данное значение годится только для очень грубых расчетов, расчетов при незначительных отклонениях величины производства или при незначительной доле постоянных издержек в общей величине издержек предприятия.

При увеличении объемов производства расчетная величина издержек (TC), полученная, исходя из значений показателя ATC и умножением на объем производства, иной, чем расчетный, будет больше фактической (издержки будут завышены), а при уменьшении, наоборот — занижены. Это будет происходить вследствие влияния условно-постоянных издержек (TFC). Поскольку TC = TFC + TVC, то

ATC = TC / Q ATC = ( TFC + TVC ) / Q

Таким образом, при изменении объемов производства величина постоянных издержек (TFC) не будет меняться, что приведет к погрешности, описанной выше.

### Зависимость видов издержек от уровня производства

На графиках отображена динамика величин различных видов издержек в зависимости от объемов производства на предприятии.

### Предельные издержки (MC)

Предельные издержки — это величина дополнительных издержек, необходимых для производства каждой дополнительной единицы продукции.

MC = ( TC2 — TC1 ) / ( Q2 — Q1)

Термин «предельные издержки» (в литературе часто обозначается как MC — marginal costs) не всегда правильно воспринимается, так как явился следствием не вполне корректного перевода английского слова margin.

В русском языке «предельный» часто означает «стремящийся к максимуму», тогда как в данном контексте следует понимать, как «находящийся в границах».

Поэтому авторы, знающие английский язык (здесь улыбнемся), вместо слова «предельные» используют термин «граничные издержки» или даже просто «маржинальные издержки».

Из приведенной выше формулы легко заметить, что MC для каждой дополнительной единицы продукции будет равно AVC на промежутке  [  Q1 ; Q2 ].

Поскольку TC = TFC + TVC, то
MC = ( TC2 — TC1 ) / ( Q2 — Q1)
МС = ( TFC  + TVC2 —  TFC — TVC 1)  / ( Q2 — Q1)
МС = ( TVC2 — TVC 1)  / ( Q2 — Q1)

То есть предельные (маржинальные) издержки в точности равны переменным издержкам, необходимым для производства дополнительной продукции.

Если нам необходимо посчитать MC при конкретном объеме производства, то предполагаем, что интервал, с которым мы имеем дело, равен [ 0; Q ] (то есть от нуля до текщуго объема), тогда в «точке ноль» переменные издержки равны нулю, производство также равно нулю и формула упрощается до следующего вида:

МС = ( TVC2 — TVC 1)  / ( Q2 — Q1)
МС =  TVC Q  / Q  где

TVC Q  — переменные издержки, необходимые для производства Q единиц продукции.

Примечание. Оценить динамику различных видов издержек можно на техническом примере по нахождению издержек в виде задачи по экономике.

Источник: `https://profmeter.com.ua/Encyclopedia/detail.php?ID=975`

## Average Costs and Curves

• Describe and calculate average total costs and average variable costs
• Calculate and graph marginal cost
• Analyze the relationship between marginal and average costs

The cost of producing a firm’s output depends on how much labor and capital the firm uses.

A list of the costs involved in producing cars will look very different from the costs involved in producing computer software or haircuts or fast-food meals. However, the cost structure of all firms can be broken down into some common underlying patterns.

When a firm looks at its total costs of production in the short run, a useful starting point is to divide total costs into two categories: fixed costs that cannot be changed in the short run and variable costs that can be changed.

The breakdown of total costs into fixed and variable costs can provide a basis for other insights as well.

The first five columns of Table 1 should look familiar—they come from the Clip Joint example we saw earlier—but there are also three new columns showing average total costs, average variable costs, and marginal costs. These new measures analyze costs on a per-unit (rather than a total) basis.

Table 1. Different Types of CostsLaborQuantityFixed CostVariable CostTotal CostMarginal CostAverage Total CostAverage Variable Cost
116\$160\$80\$240\$5.00\$15.00\$5.00
240\$160\$160\$320\$3.30\$8.00\$4.00
360\$160\$240\$400\$4.00\$6.60\$4.00
472\$160\$320\$480\$6.60\$6.60\$4.40
580\$160\$400\$560\$10.00\$7.00\$5.00
684\$160\$480\$640\$20.00\$7.60\$5.70

Watch this clip as a continuation from the video on the previous page to see how average variable cost, average fixed costs, and average total costs are calculated.

﻿﻿﻿﻿

Average total cost is total cost divided by the quantity of output. Since the total cost of producing 40 haircuts at “The Clip Joint” is \$320, the average total cost for producing each of 40 haircuts is \$320/40, or \$8 per haircut. Average cost curves are typically U-shaped, as Figure 1 shows.

Average total cost starts off relatively high, because at low levels of output total costs are dominated by the fixed cost; mathematically, the denominator is so small that average total cost is large. Average total cost then declines, as the fixed costs are spread over an increasing quantity of output.

In the average cost calculation, the rise in the numerator of total costs is relatively small compared to the rise in the denominator of quantity produced. But as output expands still further, the average cost begins to rise.

At the right side of the average cost curve, total costs begin rising more rapidly as diminishing returns kick in.

Figure 1. Cost Curves at the Clip Joint. The information on total costs, fixed cost, and variable cost can also be presented on a per-unit basis. Average total cost (ATC) is calculated by dividing total cost by the total quantity produced. The average total cost curve is typically U-shaped.

Average variable cost (AVC) is calculated by dividing variable cost by the quantity produced. The average variable cost curve lies below the average total cost curve and is typically U-shaped or upward-sloping. Marginal cost (MC) is calculated by taking the change in total cost between two levels of output and dividing by the change in output.

The marginal cost curve is upward-sloping.

Average variable cost obtained when variable cost is divided by quantity of output. For example, the variable cost of producing 80 haircuts is \$400, so the average variable cost is \$400/80, or \$5 per haircut.

Note that at any level of output, the average variable cost curve will always lie below the curve for average total cost, as shown in Figure 1. The reason is that average total cost includes average variable cost and average fixed cost.

Thus, for Q = 80 haircuts, the average total cost is \$8 per haircut, while the average variable cost is \$5 per haircut. However, as output grows, fixed costs become relatively less important (since they do not rise with output), so average variable cost sneaks closer to average cost.

Average total and variable costs measure the average costs of producing some quantity of output. Marginal cost is somewhat different.

Recall that marginal cost, which we introduced on the previous page, is the additional cost of producing one more unit of output.  So it is not the cost per unit of all units being produced, but only the next one (or next few).

Marginal cost can be calculated by taking the change in total cost and dividing it by the change in quantity. For example, as quantity produced increases from 40 to 60 haircuts, total costs rise by 400 – 320, or 80.

Thus, the marginal cost for each of those marginal 20 units will be 80/20, or \$4 per haircut.

The marginal cost curve may fall for the first few units of output but after that are generally upward-sloping, because diminishing marginal returns implies that additional units are more costly to produce. A small range of increasing marginal returns can be seen in the figure as a dip in the marginal cost curve before it starts rising.

Watch this video to learn how to draw the various cost curves, including total, fixed and variable costs, marginal cost, average total, average variable, and average fixed costs.

The marginal cost curve intersects the average cost curve exactly at the bottom of the average cost curve—which occurs at a quantity of 72 and cost of \$6.60 in Figure 1. The reason why the intersection occurs at this point is built into the economic meaning of marginal and average costs.

If the marginal cost of production is below the average cost for producing previous units, as it is for the points to the left of where MC crosses ATC, then producing one more additional unit will reduce average costs overall—and the ATC curve will be downward-sloping in this zone.

Conversely, if the marginal cost of production for producing an additional unit is above the average cost for producing the earlier units, as it is for points to the right of where MC crosses ATC, then producing a marginal unit will increase average costs overall—and the ATC curve must be upward-sloping in this zone.

The point of transition, between where MC is pulling ATC down and where it is pulling it up, must occur at the minimum point of the ATC curve.

The same relationship is true for marginal cost and average variable cost. The reasoning is the same also. This does not hold for average fixed cost. Do you know why not? It’s because marginal cost affects variable cost, but it does not affect fixed cost.

This idea of the marginal cost “pulling down” the average cost or “pulling up” the average cost may sound abstract, but think about it in terms of your own grades.

If the score on the most recent quiz you take is lower than your average score on previous quizzes, then the marginal quiz pulls down your average. If your score on the most recent quiz is higher than the average on previous quizzes, the marginal quiz pulls up your average.

In this same way, low marginal costs of production first pull down average costs and then higher marginal costs pull them up.

The numerical calculations behind average cost, average variable cost, and marginal cost will change from firm to firm. However, the general patterns of these curves, and the relationships and economic intuition behind them, will not change.

Total cost, fixed cost, and variable cost each reflect different aspects of the cost of production over the entire quantity of output being produced. These costs are measured in dollars.

In contrast, marginal cost, average cost, and average variable cost are costs per unit. In the previous example, they are measured as cost per haircut.

Thus, it would not make sense to put all of these numbers on the same graph, since they are measured in different units (\$ versus \$ per unit of output).

It would be as if the vertical axis measured two different things.

In addition, as a practical matter, if they were on the same graph, the lines for marginal cost, average cost, and average variable cost would appear almost flat against the horizontal axis, compared to the values for total cost, fixed cost, and variable cost.

Using the figures from the previous example, the total cost of producing 40 haircuts is \$320. But the average cost is \$320/40, or \$8. If you graphed both total and average cost on the same axes, the average cost would hardly show.

average total cost:for any quantity of output, total cost divided by the quantity of outputaverage variable cost:for any quantity of output, variable cost divided by the quantity of output

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Источник: `https://courses.lumenlearning.com/wm-microeconomics/chapter/average-costs-and-curves/`

## Costs

Fixed costs are those that do not vary with output and typically include rents, insurance, depreciation, set-up costs, and normal profit. They are also called overheads.

Variable costs are costs that do vary with output, and they are also called direct costs. Examples of typical variable costs include fuel, raw materials, and some labour costs.

### An example

Consider the following hypothetical example of a boat building firm. The total fixed costs, TFC, include premises, machinery and equipment needed to construct boats, and are £100,000, irrespective of how many boats are produced. Total variable costs (TVC) will increase as output increases.

 OUTPUT TOTAL FIXED COST TOTAL VARIABLE COST TOTAL COST 1 100 50 150 2 100 80 180 3 100 100 200 4 100 110 210 5 100 150 250 6 100 220 320 7 100 350 450 8 100 640 740

Plotting this gives us Total Cost, Total Variable Cost, and Total Fixed Cost.

### Total fixed costs

Given that total fixed costs (TFC) are constant as output increases, the curve is a horizontal line on the cost graph.

### Total variable costs

The total variable cost (TVC) curve slopes up at an accelerating rate, reflecting the law of diminishing marginal returns.

### Total costs

The total cost (TC) curve is found by adding total fixed and total variable costs. Its position reflects the amount of fixed costs, and its gradient reflects variable costs.

### Average fixed costs

Average fixed costs are found by dividing total fixed costs by output. As fixed cost is divided by an increasing output, average fixed costs will continue to fall.

 OUTPUT TOTAL FIXED COST (£000) AVERAGE FIXED COST (£000) 1 100 100 2 100 50 3 100 33.3 4 100 25 5 100 20 6 100 16.6 7 100 14.3 8 100 12.5

The average fixed cost (AFC) curve will slope down continuously, from left to right.

### Average variable costs

Average variable costs are found by dividing total fixed variable costs by output.

 OUTPUT TOTAL VARIABLE COST (£000) AVERAGE VARIABLE COST (£000) 1 50 50 2 80 40 3 100 33.3 4 110 27.5 5 150 30 6 220 36.7 7 350 50 8 640 80

The average variable cost (AVC) curve will at first slope down from left to right, then reach a minimum point, and rise again.

AVC is ‘U’ shaped because of the principle of variable Proportions, which explains the three phases of the curve:

1. Increasing returns to the variable factors, which cause average costs to fall, followed by:
2. Constant returns, followed by:
3. Diminishing returns, which cause costs to rise.

### Average total cost

Average total cost (ATC) is also called average cost or unit cost. Average total costs are a key cost in the theory of the firm because they indicate how efficiently scarce resources are being used. Average variable costs are found by dividing total fixed variable costs by output.

 OUTPUT AVERAGE FIXED COST (£000) AVERAGE VARIABLE COST (£000) AVERAGE TOTAL COSTS (£000) 1 100 50 150 2 50 40 90 3 33.3 33.3 67 4 25 27.5 52.5 5 20 30 50 6 16.6 36.7 53.3 7 14.3 50 64.3 8 12.5 80 92.5

Average total cost (ATC) can be found by adding average fixed costs (AFC) and average variable costs (AVC). The ATC curve is also ‘U’ shaped because it takes its shape from the AVC curve, with the upturn reflecting the onset of diminishing returns to the variable factor.

### Areas for total costs

Total Fixed costs and Total Variable costs are the respective areas under the Average Fixed and Average Variable cost curves.

### Marginal costs

Marginal cost is the cost of producing one extra unit of output.  It can be found by calculating the change in total cost when output is increased by one unit.

 OUTPUT TOTAL COST MARGINAL COST 1 150 2 180 30 3 200 20 4 210 10 5 250 40 6 320 70 7 450 130 8 740 290

It is important to note that marginal cost is derived solely from variable costs, and not fixed costs.

The marginal cost curve falls briefly at first, then rises. Marginal costs are derived from variable costs and are subject to the principle of variable proportions.

### The significance of marginal cost

The marginal cost curve is significant in the theory of the firm for two reasons:

1. It is the leading cost curve, because changes in total and average costs are derived from changes in marginal cost.
2. The lowest price a firm is prepared to supply at is the price that just covers marginal cost.

### ATC and MC

Average total cost and marginal cost are connected because they are derived from the same basic numerical cost data.  The general rules governing the relationship are:

1. Marginal cost will always cut average total cost from below.
2. When marginal cost is below average total cost, average total cost will be falling, and when marginal cost is above average total cost, average total cost will be rising.
3. A firm is most productively efficient at the lowest average total cost, which is also where average total cost (ATC) = marginal cost (MC).

### Total costs and marginal costs

Marginal costs are derived exclusively from variable costs, and are unaffected by changes in fixed costs. The MC curve is the gradient of the TC curve, and the positive gradient of the total cost curve only exists because of a positive variable cost. This is shown below:

### Sunk costs

Sunk costs are those that cannot be recovered if a firm goes business. Examples of sunk costs include spending on advertising and marketing, specialist machines that have no scrap value, and stocks which cannot be sold off.

Sunk costs are a considerable barrier to entry and exit.

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Источник: `https://www.economicsonline.co.uk/Business_economics/Costs.html`