What is the total cost function?
The function of total costs is an economic measure that helps society to assess its profitability. As with accounting rules, the total cost is the sum of total fixed costs and total variable costs. The company can determine its profitability by deleting the total cost of total income, leaving the overall economic profit. The overall cost function provides graphs that come from different formulas and provide image references to the assessment of the growing or decreasing yields of the company. Economists or corporate finance analysts usually provide this information for the company.
The basic formula for the total cost function is the total cost of fixed costs plus x times variable costs. X represents the number of units produced by the company in a given time period. The company can involve different values into X to find the best variable costs for the total cost formula. Graphs of total costs derived from this formula come from long -term distributionTotal cost-more names for the total cost of economics-X, resulting in long-term average costs. This is necessary for mapping economic costs and revenues.
Economists and corporate finance analysts tend to map either the long -term total cost of the company or long -term average costs. The calculations are often quite technical, which leads to an analysis that is beyond this article. However, the direction of the lines on the graph is the most important in this analysis. The company can keep the graph record to analyze the trend or review of the comparison. Outside the company, these graphs have quite insignificant to external stakeholders.
The first graph in the function of the total cost rises from the left to the left to the right up at the right angle. The result of this graph is that the company earns constant revenues. This also occurs when the company has a straightforward scraper with long -term average costs and DLand -bound marginal costs of the same. Under these conditions, constant revenues are again possible. These two graphs are common in business.
When the long -term total price unifies slightly and transport, the company is experiencing rising revenues. The slope of the line is often a gentle increase for a longer period of time. Increasing revenues also occur when the long -term average costs of the company and long -term marginal costs start to the left of the graph, falling down significantly and then moving the right when a gentle drop. These are also important graphs in terms of economic analysis and overall costs.