1. What is Fixed Cost (TFC)?

Total Fixed Cost (TFC) represents the costs that do not change with the level of output in the short run. These are expenses that must be paid regardless of production volume.

2. How to Determine Fixed Cost From a Graph

The fixed cost can be identified from a total cost graph:

Where:

• \( TFC \) — Total Fixed Cost ($)
• \( y\text{-intercept} \) — The point where the total cost line intersects the y-axis

Explanation: On a cost graph with quantity on the x-axis and dollars on the y-axis, the fixed cost is represented by the point where the total cost line begins (when quantity = 0).

3. Importance of Fixed Cost Calculation

Details: Understanding fixed costs is essential for break-even analysis, pricing decisions, and financial planning. These costs must be covered before a business can become profitable.

4. Using the Calculator

Tips: Simply enter the y-intercept value from your total cost graph to calculate the fixed costs. The value must be positive.

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 change over time?
A: Yes, but only in the long run. In the short run, these costs are fixed regardless of output.

Q3: How is this different from average fixed cost?
A: Total fixed cost is the absolute amount, while average fixed cost is TFC divided by quantity produced (AFC = TFC/Q).

Q4: What are examples of fixed costs?
A: Common examples include rent, salaries, insurance, and equipment leases.

Q5: Why does the TC line start at TFC on the graph?
A: Because even at zero production, the business still incurs these fixed costs.