1. What is Average Fixed Cost?

Average Fixed Cost (AFC) is the fixed costs of production divided by the quantity of output produced. Fixed costs are those that do not change with the level of production in the short run.

2. How Does the Calculator Work?

The calculator uses the AFC formula:

Where:

• \( AFC \) — Average Fixed Cost
• \( TFC \) — Total Fixed Costs
• \( Q \) — Quantity of output produced

Explanation: As production increases, the fixed cost gets spread over more units, causing AFC to decrease.

3. Importance of AFC Calculation

Details: Understanding AFC helps businesses determine their break-even point, set pricing strategies, and analyze cost structures for decision making.

4. Using the Calculator

Tips: Enter total fixed costs in dollars and 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 level (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 fixed costs are being spread over more units of production.

Q3: What are examples of fixed costs?
A: Rent, salaries, insurance, equipment leases, and property taxes are common fixed costs.

Q4: How does AFC relate to ATC?
A: Average Total Cost (ATC) is the sum of Average Fixed Cost (AFC) and Average Variable Cost (AVC).

Q5: When is AFC most relevant?
A: AFC is particularly important in the short run when making production decisions with fixed capacity.