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Appendix: Completing a Cost Table
Two of the problems in the study guide portion of this chapter require the student to complete a
cost table. The purpose of such an exercise is to help the student better grasp how the different
costs are calculated and how they relate to each other. The steps to completing a cost table will
be illustrated in Example 7 below:
Example 7: The cost table below contains partial information. The table can be completed if the
student understands how the different costs are calculated and how they relate to each other.
Quantity TC MC AFC AVC ATC
0 240 X X X X
1 ____ 60 ____ ____ ____
2 ____ ____ 120 ____ 190
3 480 ____ ____ ____ ____
4 ____ ____ ____ 90 ____
5 ____ 140 ____ ____ ____
6 ____ ____ ____ ____ 150
The first step to completing a cost table is to determine the fixed cost. For the cost table above,
the fixed cost can be determined in one of two ways:
1. The total cost at a quantity of zero is the fixed cost. Any cost incurred at zero output must be
fixed cost, since variable costs can be avoided by not producing. Thus, the fixed cost on this table
is 240.
2. The AFC for two units is given as 120. The formula for computing AFC (AFC = FC ÷ Q) can be
adjusted to solve for FC. The formula would now be FC = AFC x Q. Thus, FC = 120 x 2 = 240.
Once the fixed cost is determined, the average fixed cost for the different quantities can be
calculated using the formula AFC = FC ÷ Q. Thus, AFC for a quantity of one is 240 ÷ 1 = 240.
AFC for a quantity of two is 240 ÷ 2 = 120. AFC for a quantity of three is 240 ÷ 3 = 80, etc. The
table below is updated for the newly calculated AFC numbers.
Quantity TC MC AFC AVC ATC
0 240 X X X X
1 ____ 60 240 ____ ____
2 ____ ____ 120 ____ 190
3 480 ____ 80 ____ ____
4 ____ ____ 60 90 ____
5 ____ 140 48 ____ ____
6 ____ ____ 40 ____ 150
Once AFC has been calculated for each quantity, the table is completed row by row. At a quantity
of one, the marginal cost is 60. Marginal cost is the increase in total cost incurred by producing
one additional unit. So the TC at a quantity of one is the 240 TC at a quantity of zero plus the 60
MC of the first unit equals 300. Once the TC at a quantity of one is computed, the ATC at a
quantity of one can be calculated. ATC = TC ÷ Q or ATC = 300 ÷ 1 = 300. Once the ATC is
calculated, AVC can be calculated. AFC + AVC = ATC. If two of the three averages are known,
the third average can be solved. In this case AFC = 240 and ATC = 300, therefore, AVC must
equal 60.
FOR REVIEW ONLY - NOT FOR DISTRIBUTION
The table on the next page is updated for the newly calculated costs at a quantity of one.
Production and Costs 20 - 6