Average cost is calculated by which of the following formulas?

Average cost is determined by the total cost of production divided by the total number of units produced. This calculation reflects the cost associated with each individual item produced, making it essential for businesses to understand their cost structure and pricing strategy. By using this formula, firms can evaluate how efficiently they are operating and identify potential areas for cost reduction.

In contrast, the other choices provide either incorrect methods for calculating average cost or pertain to different concepts. Total cost divided by total revenue would yield a ratio that does not specifically relate to the average cost of production. Total revenue divided by total costs and total revenue divided by the number of units produced also do not calculate average cost; rather, they address profitability and revenue per unit, respectively. Thus, focusing on total costs and the number of units produced is the key to accurately calculating average cost.