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 quantity of output 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 ($)
• \( Q \) — Output quantity (units)

Explanation: The formula shows how fixed costs are spread over each unit of production. As output increases, AFC decreases because the same fixed costs are divided among more units.

3. Importance of AFC Calculation

Details: Understanding AFC helps businesses determine pricing strategies, break-even points, and economies of scale. It's crucial for cost analysis and production planning.

4. Using the Calculator

Tips: Enter total fixed costs in dollars and output quantity in units. Both values must be positive numbers (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 output increases?
A: Because total fixed costs are spread over more units of production, reducing the cost per unit.

Q3: What are examples of fixed costs?
A: Common fixed costs include rent, salaries, insurance, and equipment leases - expenses that don't vary with production volume.

Q4: How is AFC used in pricing decisions?
A: Businesses must cover AFC plus average variable costs to break even. AFC helps determine minimum pricing levels.

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