Chaptu Neme

CoST
Cast - Tt_ uehes to mon Au _expendituye incauaLed
in the poductin
ammodity
fixed Cost
I It releus to the Akt wohich do not change with
change in utput
shoxt -run.
3It nomaîns censtant
4: can neve be2eHO
s. It Îs also called ayexhead cst" oR Supplementy cost
CULWe is panauel to x- axíe
Example Rent, ateuest , Deprnalen llesnca fre etc

Variable cost
cast tich is dixety change
It e<exs to the Caet
wí th change u autout
I extin toth shaut-uun snd deng - n
3 uiu in utput aud'tt fall it
fall u utsut eutout
TtCan be 2up at z o Aeel
alo calld Aume Cat
S upwand sleping
 3:

a
CWwe
TC- S TC-
TC
TC y-axs Jotal
(Gost
TC)
cemmodity rees
sy cuwe
at tasdling s ta
is ie
to Sales
Puechase
iovese the TC
ganal
at OR the
uem = Causual totax
TECt Sum
sfnq prDdudion
the -S f
total Mateial.
Excise Raw
ate to shaped TVC
TVC- level
a wotesete.duty.
xate cest TC
cuwe. TVe ot
stasiling
TEC ay
han and
xed all
Inittol TVe
it coit) unitt
eonm
of
 output or cost
Overhead
cost cat.
Suplementry
fixedghort-un
axis
allghot toX- TFe
of nin
total
tant
paualel oukput
TrC
tTVC
Ac
xQ SMC SunCons T-TCYC
or
TFG X
AFC is
to remains
It cwe
= TC
= IC
(a)TC= yeles
TfC
TEC
|:
e
c)
b) t
4 4.
3
 gutput ate
vice-versa
and
ast decuuasio
stating
c
cost vaiable
Prime
s-shaped
at
all
es bate.TVC
ef is
total inveHSe-increasing
in cuuwe
ise TVe TCTF
=
TVC
Or reBens
to
sum
Sum -
witis TVCat TVcX
AVC
SMC
=
Calulatien
o
ougin.ftuises
Cuseve
uises 4.
Iitally =
TVC
TVe. then
ItIt
ie
5
4
 Average OR cost (AC)
Average Total Cost (ATC)
Itt reBeUs to the peu unit cost ofa commodity.
It is calculatd by
by
f.e AC = TC
diiding Te by qyuanlty

3: Surm total eAfC aod AVC

f-e AC = AC tt AVC

4 Ac- cuswe isU-shaped ie it alla,

each es misâmum and then iss with increaße
output.
f. e

suiput
 3 3
cemmecly minfmum
Af Average Avc AC I
C
t
s -cuwe is varfable
Average
s s
ealculated
calulatd
the
to anddeflerance
is
ce the then
yshape
fixed
tACost
PC) W=shaped by
hy butput b/w
isee
b/u diing
ie Ac
wit tavcCost
AC olteling
ond TÈ AVC-AC-AF]
ít AFCi-e
fncrese
orreasefale
AVo. hy c
quanlty in
în by
output
uach guastiy
outpt
es
4
shape
(a) AfC - cuseye s Metangulat
Cb) Ae c fall ith increase in hypeboa
atpt.
(C)AFC CUscve nev touches any of he anls
ie

autput ReasonONE
is the orly
TFCAFC
40
29
40 20
It Îs because AFC.
is calated by TFC
3 1334 and TFC Semaina constant
I:e AfC = TF C
4 40 Lo

40
Tmportnt*

Reod Ths Table

Ror moe understaroling.
AFC iS atlang,
 3
ItI:
eaches MC=
adkatonal
MC- t
Me output
MarginalCos(met)
etes
Ueve
miniMs unit to
is the
m q
U-shaped eutput
and addten
then
al
í:e ponduong
cOst ef
ises
ibitally
ueith

mCfall.
pCuNe
 o Ho uw MC- uve is
deuíyed teon TVC-cUe
Stote
Ue latenehip blus Mc and TVC-cWMVe
Ansi) hen TVC iotaAeA
at decHLabing xate, Mc 4alla. Tuk

[2) aben TVC stop fncreasing

at deeasing ate MC taches
to minimume chouon by pont E Output
(3) hlhen Tyc ncrASL atot ocreasng
Hate MC ises

[4) Both MC_and TVC can be

calculatod kay eQch ethex
fe MC= 'ATVC TVC= SMC
output

’ Relalionshp behween MC and AC

AC
AC- C e
at it mênimum point
then MC = AC Acis mininum
McKAC
) When MCKAC AC falls
3) whan MC>AC, AC ises
 [3) [a) C32 (82
7
inceasing when qt
at ncueaseA
decsecsing WlhenTC
uthen Relalonshíp hlhen When tMC-
muimum atHelatens
hen
deCMeasing it
MC cuwe
îc TC mc2AVC MC =
xte AvC, OR hip
incHease stps AVC
uate, be cutt
tween AVC blw
MC incHoauing
Hate MC
Mc AVC AC ispointAVC-
ises at at Mc
mMC fals minimun
Me alla. kA cwee and
and
ME AVC
TC
cinuit)
tput
hunit)
tput atpuiiawit)
 4) (3)(a)when
Mcolls
when 1)
MC, Calculatod Both decuasingateTVC
alhen dechtauihg
ueat
helatfenshias
Mc Ad,AV AC
incYSlng
MCncHeasesaf MCStops
Nc
and minfmum
eache MC
by
TYC
stasli'ncuasiny
AVC
MCpach încraslng at
can increas eA
SIVcbetuseen
in =
TVen oteH isîng
a be
at
MU TS+ MC
dfagram
single
MC |TC anad
TC

TUC
Me
Mney
actual eatnad It
yplicitCost InplictCost is ACACand
Avc
not
meney Ac, AVC, AFd
vecorded
expenal
he in
ture n tinuil)
autput
soks books

o he oo
shgldireaomg
aLLUDt aCgunts.

Hs It
s
 & A faoduc ex Stabts a business by inveg ting hs wn
Swings and hitng he bor. ldenty inpleit
cast and pltlit cat fom this infomais 6çhin.
thhs In he given stateent, imputed value f the
hteyest fhat a poDducer wald have euned en
ho savings uill
wiu 'be inpltit cost and wag es paid
he labeun wtll be the eplit cost.
Implit costcost
hese aue cest ofsell -ooreg and e dinalayed
fmterest em mon capitl.et
Eypltit
4hese aNe thase cash payment, ehich doms make
labour Paymet foY ao mateialYentirteret
etc.
PHOduce tom uy mrey Rd ftaut 2busires.
te 'hinself lookt ofty the bunes ldenty
inpltit cst and cyplt at fm this infomtien
Glain.
Any Th ttis given chtimert inteyest pald en bakawa
mmey uil be eroliit cet and facome eayred
hia

sen land, terest en own capital,ete.

 -Seetces
C3) (9) yu
formule Expit
fums
which
4VC = mateia
nateiat
ret
MC
=AC
cagt
=
TEC
APCt
makeJhese
AVC
MlHest
et. to
Aabow, aHe
Duliler
ATVC paymenti,
hetecah
paymer
paymert o or
Bi

faor