1. What is Average Fixed Cost?

Average Fixed Cost (AFC) is the fixed cost per unit of output, calculated by dividing total fixed costs by the number of units produced. Fixed costs are expenses that do not change with the level of production.

2. How Does the Calculator Work?

The calculator uses the AFC formula:

Where:

• \( AFC \) — Average Fixed Cost ($ per unit)
• \( TFC \) — Total Fixed Cost ($)
• \( Q \) — Quantity of units produced

Explanation: As production increases, AFC decreases because the same fixed costs are spread over more units.

3. Importance of AFC Calculation

Details: Understanding AFC helps businesses determine pricing strategies, break-even points, and the impact of production volume on per-unit costs.

4. Using the Calculator

Tips: Enter total fixed costs in dollars and quantity in whole numbers. Both values must be positive (TFC > 0, Q ≥ 1).

5. Frequently Asked Questions (FAQ)

Q1: What's the difference between fixed and variable costs?
A: Fixed costs remain constant regardless of production levels (e.g., rent), while variable costs change with production volume (e.g., raw materials).

Q2: Why does AFC decrease as production increases?
A: Because the same total fixed costs are divided by a larger number of units, reducing the cost per unit.

Q3: What are examples of fixed costs?
A: Common fixed costs include rent, salaries, insurance, and equipment leases.

Q4: How is AFC used in business decisions?
A: AFC helps determine minimum pricing, evaluate production efficiency, and assess economies of scale.

Q5: Does AFC ever reach zero?
A: No, AFC asymptotically approaches zero as quantity increases but never actually reaches it.