How is total costs calculated in a business?

Total costs in a business are calculated by adding fixed costs to variable costs. Fixed costs are expenses that do not change with the level of production or sales, such as rent and salaries. Variable costs, on the other hand, fluctuate based on the volume of production or services provided, like raw materials and direct labor. Therefore, to understand the full financial burden on a business for producing goods or services, one must take both types of costs into account. This comprehensive view allows for better budgeting and pricing strategies to ensure profitability.

The other choices do not accurately represent the calculation of total costs. Sales volume multiplied by price refers to calculating total revenue, not costs. Operating expenses minus revenue could provide a measure of profit or loss but does not directly relate to total cost calculation. Lastly, the sum of all assets pertains to a business's balance sheet and does not reflect cost assessment.