What this calculator does
Fixed costs do not change with how much you produce. Rent, insurance, equipment leases and salaried staff cost the same whether you make one unit or ten thousand. Average fixed cost spreads that total across the units actually produced, which is why it falls as output rises.
That falling curve is the whole of what people mean by economies of scale in the simplest sense. Nothing about the fixed cost changed; there are just more units sharing it.
The formula
Divide total fixed cost by the number of units produced to get average fixed cost. Adding the average variable cost per unit gives average total cost, which is the full cost of producing one unit at that level of output.
| Term | Meaning |
|---|---|
| Fixed cost | A cost that does not change with output over the period in question, such as rent or an equipment lease. |
| Average fixed cost (AFC) | Total fixed cost divided by units produced, so it falls continuously as output rises. |
| Average total cost (ATC) | Average fixed cost plus average variable cost: the full cost of one unit at a given output level. |
The inputs explained
| Field | What to enter |
|---|---|
| Total fixed cost ($) | Total fixed costs for the period, covering everything that does not vary with output. |
| Units produced | How many units are produced in the period. |
| Average variable cost per unit ($) | The variable cost of producing one unit, such as materials and direct labour. Set it to zero to see the fixed cost portion alone. |
When to use it
Working out a break-even price
Average total cost at an expected output level is the floor a price has to clear before a unit contributes anything toward profit.
Understanding why volume changes the maths
The same factory at 500 units and at 10,000 units has very different unit costs, entirely because of how the fixed costs are spread.
Comparing making more against charging more
Since average fixed cost falls with volume, a lower price at higher output can leave a wider margin per unit than a higher price at low output.
Worked examples
Every figure in the tables below is produced by this page’s own calculator at build time, so the numbers and the tool always agree. Select any row to load that scenario.
How does unit cost fall as output rises?
The same fixed cost base spread across increasing output.
| Units produced | Average fixed cost | Average total cost |
|---|---|---|
| 500 | $100.00 per unit | $112.00 per unit |
| 1,000 | $50.00 per unit | $62.00 per unit |
| 2,000 | $25.00 per unit | $37.00 per unit |
| 5,000 | $10.00 per unit | $22.00 per unit |
| 10,000 | $5.00 per unit | $17.00 per unit |
Questions
Does average fixed cost ever reach zero?
No. It gets closer to zero as output rises but never arrives, since the fixed cost is always being divided by a finite number of units. That is why average total cost approaches the variable cost per unit as a floor without ever going below it.
What counts as fixed rather than variable?
It depends on the time frame. Over a month, rent and salaried staff are fixed. Over several years almost everything becomes variable, since leases end and capacity can be changed. Choose the classification that matches the period being analysed.
Why does average total cost sometimes rise again at high output?
In practice, pushing output past a certain point brings overtime rates, equipment strain or the need for new premises, which raises variable cost or adds fixed cost. This calculator holds both inputs constant, so it shows the simple case rather than that turning point.
Is average total cost the same as marginal cost?
No. Average total cost is the cost per unit across all units produced. Marginal cost is the cost of producing one more unit, which for a fixed cost base is just the variable cost.
For the variable side of the same picture, see the average variable cost calculator. For where the two cover total costs, see the break-even calculator.