A cost function links the quantity produced with the total cost. The linear form splits costs into a fixed part that does not change with output and a variable part that rises with each unit – a good approximation over normal output ranges.
How to use the Cost Function Calculator
- I know
- Fixed cost
- Variable cost per unit
- Quantity 1
- Total cost at quantity 1
- Quantity 2
- Total cost at quantity 2
- Quantity to evaluate
Results update as you type, and every field accepts the units shown in its menu.
How it works
Choose whether you know the fixed and variable costs or two cost points, then enter the quantity to evaluate.
Tips
- Use figures for the same period (a month, a quarter or a year) for every input so ratios compare like with like.
- Track the metric over time – the trend usually tells you more than a single value.
- Compare your result with industry benchmarks, which vary a lot between sectors.
- Treat the result as a starting point for a decision, then check the assumptions behind each input.
Common mistakes to avoid
- Mixing monthly and yearly numbers in the same calculation.
- Using revenue where the formula needs profit (or the other way round).
- Forgetting hidden costs such as taxes, fees, overheads or your own time.
Inputs explained
| Field | What to enter |
|---|---|
| I know | Choose one: Fixed cost and variable cost per unit, Total cost at two quantities |
| Fixed cost | Amount in your currency |
| Variable cost per unit | Amount in your currency |
| Quantity 1 | A number |
| Total cost at quantity 1 | Amount in your currency |
| Quantity 2 | A number |
| Total cost at quantity 2 | Amount in your currency |
| Quantity to evaluate | A number |
What each result means
- Total variable cost = [Variable cost per unit]×[Quantity to evaluate]
- Total cost C(Q) = [Fixed cost] + [Variable cost per unit]×[Quantity to evaluate]
- Average cost per unit = [Total cost C(Q)]÷[Quantity to evaluate]
Example values
How the main result changes when Fixed cost changes and everything else stays at the example values above:
| Fixed cost | Total cost C(Q) |
|---|---|
| 2,500 | 5,500 |
| 3,750 | 6,750 |
| 5,000 | 8,000 |
| 6,250 | 9,250 |
| 7,500 | 10,500 |
| 10,000 | 13,000 |
Formula
C(Q) = FC + VC × QFrom two points: VC = (C₂ − C₁) ÷ (Q₂ − Q₁); FC = C₁ − VC × Q₁Average cost = C(Q) ÷ QWorked example
Inputs — I know: Fixed cost and variable cost per unit; Fixed cost: $5,000; Variable cost per unit: $12; Quantity 1: 100; Total cost at quantity 1: $6,200; Quantity 2: 400; Total cost at quantity 2: $9,800; Quantity to evaluate: 250.
Results — Variable cost per unit = $12.00; Fixed cost = $5,000.00; Total variable cost = $3,000.00; Total cost C(Q) = $8,000.00; Average cost per unit = $32.00.
Frequently asked questions
What is a cost function?
An equation that gives total cost for any output level, such as C(Q) = 5,000 + 12Q.
How do I find the cost function from data?
Use two output levels and their costs: the slope is the variable cost.
Is the cost function always linear?
No – real costs can curve, but a straight line works over normal ranges.
What formula does the Cost Function Calculator use?
C(Q) = FC + VC × Q.