Total cost
In one sentenceThe sum of the fixed and variable costs a business incurs to produce a given quantity or provide a service over a specific period.
Simply put
Total cost adds up everything you spent on the product: fixed costs that do not change with quantity, such as rent, and variable costs that rise with each unit, such as materials.
If you divide it by the number of units you get the unit cost, which is the basis for pricing and for knowing your real profit.
Worked example
A plastic packaging factory has monthly fixed costs of 40,000 SAR and a variable cost of 15 SAR per carton, and produced 2,000 cartons.
Fixed costs40,000 SAR
Variable costs15 × 2,000 = 30,000 SAR
Cost per carton70,000 ÷ 2,000 = 35 SAR
Total cost for the month70,000 SAR
Formula: Fixed costs + (variable cost per unit × number of units)
Don't confuse it with
Marginal costMarginal cost is only what one additional unit adds, while total cost is the sum of all costs.