1. What is Total Fixed Cost?

Total Fixed Cost (TFC) represents the costs that do not change with the level of output in the short run. These are expenses that must be paid regardless of production volume, such as rent, salaries, and insurance.

2. How Does the Calculator Work?

The calculator uses the simple formula:

Where:

• \( TFC \) — Total Fixed Cost ($)
• \( TC \) — Total Cost ($)
• \( TVC \) — Total Variable Cost ($)

Explanation: Since total cost is the sum of fixed and variable costs, subtracting variable costs from total costs leaves only the fixed costs.

3. Importance of TFC Calculation

Details: Understanding fixed costs is essential for break-even analysis, pricing decisions, and financial planning. Fixed costs affect a company's operating leverage and risk profile.

4. Using the Calculator

Tips: Enter total cost and total variable cost in dollars. Both values must be positive numbers, with total cost greater than or equal to variable cost.

5. Frequently Asked Questions (FAQ)

Q1: What's the difference between fixed and variable costs?
A: Fixed costs remain constant regardless of production levels (e.g., rent), while variable costs change with production volume (e.g., raw materials).

Q2: Can fixed costs change over time?
A: Yes, but not with production volume. Fixed costs may change due to new contracts, inflation, or other long-term factors.

Q3: How is TFC used in break-even analysis?
A: Break-even point = TFC / (Price per unit - Variable cost per unit). It shows how many units must be sold to cover all costs.

Q4: Are salaries always fixed costs?
A: Only if they don't vary with production. Sales commissions or overtime pay would be variable costs.

Q5: What if my TVC is higher than TC?
A: This shouldn't happen mathematically as TC = TFC + TVC. Check your input values if you get a negative TFC.