Definition – What is average fixed cost?
AFC is the amount of fixed cost used per item produced.
Fixed costs are the costs that do not change when there are additional units produced. These are different from variable costs, which are the costs that are only incurred with an additional unit produced.
Formula – How to calculate Average Fixed Costs
Average Fixed Costs = Total Fixed Costs ÷ Quantity
A company has total fixed costs of $200,000 and creates 400 units.
Average Fixed Costs = $200,000 / 400 = $5,000
Therefore, there are average fixed costs of $5,000 per unit.