1. What is Total Fixed Cost?

Total Fixed Cost (TFC) refers to the costs that do not change with the level of production or sales. These are expenses that must be paid regardless of business activity level, such as rent, salaries, and insurance.

2. How Does the Calculator Work?

The calculator uses the simple formula:

Where:

• \( TFC \) — Total Fixed Cost ($)
• \( TC \) — Total Cost ($)
• \( TVC \) — Total Variable Cost ($)

Explanation: Fixed costs are calculated by subtracting all variable costs from the total costs of production.

3. Importance of Fixed Cost Calculation

Details: Understanding fixed costs is essential for break-even analysis, pricing decisions, and financial planning. Fixed costs help determine the minimum revenue needed to cover all expenses.

4. Using the Calculator

Tips: Enter total cost and total variable cost in dollars. Both values must be positive numbers, with total cost greater than or equal to variable cost.

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: Can fixed costs ever change?
A: Yes, but not with production volume. Fixed costs may change due to new contracts, inflation, or business decisions.

Q3: How do fixed costs affect pricing?
A: Fixed costs are spread over all units produced, so higher production typically means lower fixed cost per unit.

Q4: Are salaries always fixed costs?
A: Only if they don't vary with production. Sales commissions would be variable costs.

Q5: What if my TFC calculation is negative?
A: This suggests an error as fixed costs can't be negative. Check that your TC ≥ TVC.