average total cost

Average total cost (ATC) refers to the total expenses incurred in producing goods or services divided by the quantity produced. It includes all costs, such as materials, labor, and overheads, averaged over the total output. Understanding ATC helps businesses determine the cost efficiency of their production. A lower average total cost indicates better efficiency and can lead to healthier profit margins. Companies often analyze ATC to set pricing strategies and make informed decisions about scaling production, improving processes, or identifying areas to reduce costs.