1. What is the Fixed Cost Per Unit Formula?

The Average Fixed Cost (AFC) formula calculates the fixed cost per unit of output by dividing total fixed costs by the quantity of output produced. It helps businesses determine how fixed costs are allocated across each unit.

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 output (units)

Explanation: The formula shows how fixed costs are spread over each unit of production. As quantity increases, the fixed cost per unit decreases.

3. Importance of AFC Calculation

Details: Calculating AFC is essential for pricing decisions, break-even analysis, and understanding cost behavior in business operations. It helps determine the minimum price needed to cover fixed costs.

4. Using the Calculator

Tips: Enter total fixed costs in dollars and quantity in whole 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 volume (e.g., rent), while variable costs change with production (e.g., raw materials).

Q2: Why does AFC decrease as quantity increases?
A: Because the same total fixed cost is being spread over more units, reducing the cost per unit.

Q3: How is AFC used in pricing decisions?
A: Businesses must cover AFC plus variable costs to break even. AFC helps determine minimum pricing thresholds.

Q4: Does AFC appear on financial statements?
A: No, financial statements show total costs. AFC is an analytical tool for internal decision making.

Q5: Can AFC be zero?
A: Only theoretically when quantity approaches infinity. In practice, AFC always exists when there are fixed costs.