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Total cost are the sum of total fixed costs and total variable costs at every level of output.

Before, we start discussing about total cost, first we understand what is fixed costs and variable costs.

Fixed costs are those expenses of production which are not related to the volume of output. They remain fixed when output increases or decreases, or becomes zero. Expenditure on such items as land, building, machinery, etc. are the examples of fixed costs. They are known as 'Supplementary costs'.

Variable costs are those expenses of production which vary or change directly with level of output. Means, if output expanded they increase or decrease when the output is reduced. At zero production there are no variable costs. Expenses on raw materials, power, temporary labour, etc are the examples of variable costs. They are known as 'Prime costs'.

Now, we will discuss about Total Costs in detail-

Total Costs: 

As we know, Total costs = Total fixed costs + Total variable costs. we understand more clearly with the help of figure as mentioned below-

As shown in above figure, TVC is total variable cost curve while TC is total cost curve. Here, at OA level of output, AB is total variable cost and BC is total fixed cost and therefore - AC (AB + BC) is total cost.

It indicates that at any level of output, vertical distance between TC curve and TVC curve represents total fixed cost. TC curve is parallel to TVC curve, total fixed cost (BC) is constant or same at any level of output.

It clearly indicates fact that TC curve is parallel to TVC curve means that the behaviour of total cost is same as that of total variable cost. Total cost is OE at zero output. Then total cost increases with output but at a diminishing rate upto point C. Here, after point C, total cost increases at an increasing rate. Below mentioned table helps us to understand more clearly.

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