ExpertEasy1 markMultiple Choice
AQA GCSE · Question 01.4 · Business operations
Which of the following is the formula for total costs?
Which of the following is the formula for total costs?
Answer options:
A.
Fixed cost per unit + variable cost per unit
B.
Total variable costs + average unit costs
C.
Total variable costs + fixed costs
D.
Variable cost per unit × number of units
How to approach this question
Recall the fundamental cost formula in business. Total costs are comprised of two main categories: costs that change with output (variable) and costs that do not (fixed). Find the option that adds these two components together.
Full Answer
C.Total variable costs + fixed costs✓ Correct
The correct answer is C. Total costs are the sum of all costs incurred by a business, which are broken down into fixed costs and total variable costs.
Total costs (TC) represent the total expense incurred in producing a certain level of output. The formula is TC = Fixed Costs (FC) + Total Variable Costs (TVC). Fixed costs (e.g., rent, salaries) do not change with output. Variable costs (e.g., raw materials) change directly with the level of production. Total variable costs are found by multiplying the variable cost per unit by the number of units produced.
Common mistakes
✗ Choosing option D, which only calculates the variable cost component, not the total cost. ✗ Choosing option A, which calculates the average cost, not the total.
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