Total cost

Accounting: (usually pl.) sum of Fixed Costs semivariable costs, and Variable Costs.

Investments: contract price paid for a security plus the brokerage commission plus any Accrued Interest due the seller (if the security is a bond). The figure is not to be confused with the Cost Basis for the purpose of figuring the Capital Gains Tax which may involve other factors such as amortization of bond premiums.

Sum of the various costs incurred. For example, total manufacturing costs are the sum of direct materials, direct labor, and factory overhead. By management function, the total costs of a manufacturing business are the sum of manufacturing costs and selling and administrative expenses. By behavior in relation to fluctuations in activity, total costs are the sum of variable costs and fixed cost. See also Unit Cost.

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One can decompose Total Costs as Fixed Costs plus Variable Costs. In the Cost-Volume-Profit Analysis model, Total Costs are linear in volume.

In economics, and cost accounting, total cost (TC) describes the total economic cost of production and is made up of variable costs, which vary according to the quantity of a good produced and include inputs such as labor and raw materials, plus fixed costs, which are independent of the quantity of a good produced and include inputs (capital) that cannot be varied in the short term, such as buildings and machinery. Total cost in economics includes the total opportunity cost of each factor of production in addition to fixed and 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 by the accountants, then total cost is linear in volume, and given by: total cost = fixed costs + unit variable cost * amount.

See also

• Semi variable cost

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