Average Variable Cost (AVC)

Definition

Average variable cost (AVC) is obtained by dividing total variable cost by the quantity produced. It shows how much each unit of output contributes to covering variable costs.

Related terms

Total Variable Cost: Total variable cost is the sum of all costs that vary with production levels.

Marginal Cost: Marginal cost represents the additional expense incurred from producing one more unit of output.

Average Fixed Cost (AFC): AFC is calculated by dividing total fixed cost by quantity produced. It shows how much each unit contributes towards covering fixed costs.