Total Variable Cost (TVC):

Total variable cost is incurred when variable inputs are employed by the firm. It is the total expenditure on variable factors used in the course of production. This can also be considered as the total explicit and implicit costs of variable inputs. Because the level of variable factors used in the short-run determines the level of output, total variable cost changes whenever output is varied. When the firm does not produce anything, variable costs are not incurred. Hence they are sometimes referred to as avoidable costs. They may include wages of operative staff, cost of fuel, cost of raw materials, etc. Average variable cost (AVC) is the variable cost per unit of output produced meaning it is TVC divided by quantity of output produced (Q).

AVC = TVC/Q