1. What is Average Fixed Cost?

Average Fixed Cost (AFC) is the fixed cost per unit of output produced. Fixed costs are expenses that do not change with the level of production, such as rent, salaries, and equipment costs.

2. How Does the Calculator Work?

The calculator uses the AFC formula:

Where:

• \( AFC \) — Average Fixed Cost (USD/unit)
• \( Total\ Fixed\ Cost \) — Sum of all fixed costs (USD)
• \( Quantity \) — Number 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 their break-even point, set pricing strategies, and make production decisions. It's crucial for cost analysis and profit planning.

4. Using the Calculator

Tips: Enter total fixed costs in USD and production quantity in units. Both values must be positive numbers (fixed cost > 0, quantity ≥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 quantity increases?
A: Because the same fixed costs are spread over more units, reducing the cost per unit.

Q3: How is AFC used in business decisions?
A: It helps determine minimum production levels needed to cover fixed costs and informs pricing strategies.

Q4: What are examples of fixed costs?
A: Rent, salaries, insurance, equipment leases, and property taxes are common fixed costs.

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