Enter the fixed cost, variable cost per unit, and the total number of units produced into the calculator to determine the total cost using the cost function.
Cost Function Formula
The following is the typical cost function associated with producing goods.
C(x) = FC + x * VC
- Where C(x) is the total cost at x number of units
- FC is the fixed cost
- x is the total number of units
- VC is the average variable cost per unit
This is considered the most standard cost function, but a cost function can be any function defined by a company that accurately predicts costs.
Cost Function Definition
A cost function is a variable function that predicts the total cost of a good or service based on the number of units produced.
Cost Function Example
For example, a cost function could look something like this: C(x) = FC + (X + VC) 2 . In this case, the total cost is dependent on the total units and variable cost squared. That means the total cost goes up exponentially with units product. This is not necessarily realistic, but it gives you an idea of how these functions can be used to map total cost.
A cost function is any variable function that can be used to predict the total costs of a good or service at any number of units desired.
A cost function is created similarly to the example above. After taking a time period of data of total units and total costs, a line of best fit can be mapped to the data and a function can be created to equal that line.