How to Calculate Average Fixed Cost (AFC)
Average fixed cost equals total fixed cost divided by quantity: AFC = FC ÷ Q, and it falls at every higher level of output.
The Average Fixed Cost formula
Calculator
Enter fixed cost and two output levels to watch average fixed cost fall as it spreads over more units.
Rent, insurance and leases, owed at every output level including zero.
The output level you want the per-unit figure for.
Same fixed cost, more units. This is what makes AFC fall.
At this output the firm carries $30 of fixed cost on every unit it makes.
- AFC at the higher quantity
- $10
- Fall in AFC
- $20
- What happens to AFC
- Falls as output rises
The same fixed cost split across the larger output works out to $10 per unit.
Producing more cuts the fixed cost carried by each unit by $20, with no change in total fixed cost.
The numerator is fixed while the denominator grows, so AFC keeps sliding toward zero without ever reaching it.
How to calculate Average Fixed Cost, step by step
- 1Identify total fixed cost. Costs that do not change with output, such as rent, insurance, and payments on leased equipment.
- 2Pick an output level. Choose the quantity Q you want the per-unit figure for.
- 3Divide. AFC = FC ÷ Q, the fixed cost spread across each unit produced.
- 4Repeat at a higher quantity. Recomputing at a larger Q shows AFC falling, since the same fixed cost is shared by more units.
Worked example: Average Fixed Cost
A print shop owes $900 a month in rent and insurance no matter how much it prints. At 30 posters, AFC = 900 ÷ 30 = $30 per poster. At 90 posters, AFC = 900 ÷ 90 = $10 per poster, the same fixed cost spread three times as thin.
Average Fixed Cost questions
Why does average fixed cost always fall?
The numerator stays constant while the denominator grows, so dividing the same fixed cost by a larger quantity always gives a smaller number.
Does AFC ever reach zero?
No, AFC gets closer and closer to zero as output rises but never gets there, so the curve approaches the horizontal axis without touching it.
Is there average fixed cost in the long run?
No, every input is variable in the long run, so there are no fixed costs and no AFC to calculate.
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