What this calculator does
Average fixed cost (AFC) is the share of a firm's fixed costs assigned to each unit of output. This tool divides your total fixed costs by the quantity produced to give AFC per unit, then adds average variable cost to show average total cost, the total cost at that output level, and how much of each unit's cost is fixed.
The formula
The standard definitions from cost accounting and microeconomics are:
- Average fixed cost: AFC = Total Fixed Costs ÷ Quantity. At $12,000 in fixed costs over 500 units, AFC = 12,000 ÷ 500 = $24 per unit.
- Average total cost: ATC = AFC + AVC, where AVC is average variable cost per unit. It also equals Total Cost ÷ Quantity.
- Total cost: TC = Total Fixed Costs + (AVC × Quantity) — the full cost of producing that output.
Fixed costs — rent, insurance, salaried staff, equipment leases — do not change with the number of units you make in the short run. Variable costs, such as materials and hourly labor, rise with output.
Why AFC falls as output rises
Because total fixed costs stay the same while the denominator grows, AFC always declines as quantity increases. This is the spreading effect: producing more units divides the same fixed overhead over a larger base, so each unit carries less of it. Doubling output from 500 to 1,000 units halves AFC from $24 to $12 per unit, even though total fixed costs are unchanged.
Interpreting the fixed-cost share
The fixed-cost share is AFC ÷ ATC. A high share signals high operating leverage: a large part of each unit's cost is fixed, so profit swings sharply with sales volume. A low share means costs move more directly with output. Comparing AFC at different quantities shows how much extra scale lowers your per-unit cost.