Total Cost refers to the complete expense incurred in producing a good or service. It includes both fixed costs, which do not change with the level of production, such as rent and salaries, and variable costs, which fluctuate based on production volume, like materials and labor. Understanding total cost is essential for businesses to set prices and manage budgets effectively. Calculating total cost helps businesses determine profitability. By comparing total cost to total revenue, companies can assess whether they are operating at a profit or a loss. This analysis is crucial for making informed decisions about pricing, production levels, and overall financial strategy.