The Average Total Cost formula computes the Unit Cost or Average Total Cost which is equal to the sum of the fixed and variable costs divided by the number of goods produced (the output quantity, Q).
INSTRUCTIONS: Choose currency units and enter the following.
- (FC) Total Fixed Costs
- (VC) Total Variable Costs
- (Q) Quantity of Output
Average Total Cost (ATC): The calculator returns the Average Total Cost in U.S. Dollars (USD). However, this can be automatically converted to other currencies via the pull-down menu.
The Math / Science
The Unit Cost or Average Total Cost which is equal to the sum of the fixed and variable costs divided by the number of goods produced (the output quantity, Q). The formula for the Average Total Cost is:
ATC = (FC + VC) / Q
where:
- ATC is the Average Total Cost
- FC is the total fixed cost
- VC is the total variable cost
- Q is the quantity of output
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Note: The above formula is the algebraic equivalence of ATC = FC/Q + VC/Q which appears in some texts.
Average costs may be dependent on the time period considered (increasing production may be expensive or impossible in the short term, for example). Average costs affect the supply curve and are a fundamental component of supply and demand.
Resource:
- Mankiw, N. Gregory. "Chapter 13:The Various Measures of Cost."Principles of Microeconomics. 6th ed. Mason, OH: Thomson/South-Western, 2004. 265-68. Print.
- "Average Cost." Wikipedia. Wikimedia Foundation, n.d. Web. 30 May 2015.