What is the difference between Total Cost, fixed cost and variable cost?
What is the difference between Total Cost, fixed cost and variable cost?
Saturday, January 11, 2020
What is the difference between Total Cost, fixed cost and variable cost?
FIXED COST
Periodic cost that remains (more or less) unchanged irrespective of the output level or sales revenue of a firm, such as depreciation, insurance, rent, salaries and wages. In simple words, the costs of the firm which don’t change with the production are called Fixed Cost.
When the production is zero fixed cost is Rs.30 and when the production is minimum one again the fixed cost is RS.30. So much when the production is maximum up to 5 units, still the fixed cost is Rs.30. It is, therefore proved that fixed cost does not change with the production but it remains the same with all the volumes of production within the total production capacity of the firm
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Variable Cost
The concept of variable cost is opposite to the fixed cost. In other words, when the production change, the fixed cost remains the same but the variable cost changes. In other words, the costs of variable inputs; they change as output changes.
Explanation of Variable Cost by Schedule
The production column shows the minimum production one unit and the maximum five units. When the production is zero or the factory is closed, the variable cost is also zero but when the production is becomes one, the variable cost becomes Rs.19. As the production is increasing, variable cost is also increasing. So much so, when the production is maximum 5 units, variable cost is also maximum Rs.50. in other words, production and variable cost change simultaneously in the same direction.
TOTAL COST
FIXED COST
Periodic cost that remains (more or less) unchanged irrespective of the output level or sales revenue of a firm, such as depreciation, insurance, rent, salaries and wages. In simple words, the costs of the firm which don’t change with the production are called Fixed Cost.
Explanation of Fixed Cost by Schedule
|
Unit of production
|
Fixed cost
|
|
0
|
30
|
|
1
|
30
|
|
2
|
30
|
|
3
|
30
|
|
4
|
30
|
|
5
|
30
|
When the production is zero fixed cost is Rs.30 and when the production is minimum one again the fixed cost is RS.30. So much when the production is maximum up to 5 units, still the fixed cost is Rs.30. It is, therefore proved that fixed cost does not change with the production but it remains the same with all the volumes of production within the total production capacity of the firm
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Domestic Trade vs International Trade & Advantages Vs Disadvantages
Variable Cost
The concept of variable cost is opposite to the fixed cost. In other words, when the production change, the fixed cost remains the same but the variable cost changes. In other words, the costs of variable inputs; they change as output changes.
|
Unit of production
|
variable cost
|
|
0
|
00
|
|
1
|
19
|
|
2
|
18
|
|
3
|
24
|
|
4
|
32
|
|
5
|
50
|
TOTAL COST
In economics, total cost describe the economic cost of production and is made up of variable cost, which vary according to the quantity of a good produced and include inputs such as labors or raw materials, fixed costs, which are independent of the quantity of a good produced and include input capital that cannot be varies in the short term, such as buildings ands machinery. Total cost in economics includes the total opportunity cost of each factor of production as part of its fixed or variable cost. In other words, Total Cost is the combination of Fixed Cost and Variable Cost.
TOTAL COST = FIXED COST + VARIABLE COST
Combined Diagram of Fixed Cost, Variable Cost and Total Cost
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