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 costs must be paid even when production is zero, such as rent, salaries, and insurance.

2. How Does the Calculator Work?

The calculator uses the TFC formula:

Where:

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

Explanation: Fixed costs are calculated by subtracting variable costs (which change with production) from total costs.

3. Importance of TFC Calculation

Details: Understanding fixed costs is essential for break-even analysis, pricing decisions, and financial planning in businesses.

4. Using the Calculator

Tips: Enter total cost and total variable cost in dollars. Both values must be positive numbers.

5. Frequently Asked Questions (FAQ)

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

Q2: Can fixed costs change over time?
A: Yes, but only in the long run. In the short run, these costs are fixed regardless of production levels.

Q3: How does TFC relate to average fixed cost?
A: Average Fixed Cost (AFC) is calculated as TFC divided by quantity of output (AFC = TFC/Q).

Q4: Are salaries always fixed costs?
A: Only if they don't vary with production. Salaries of production workers are typically variable costs.

Q5: Why is TFC important for businesses?
A: Knowing fixed costs helps determine the minimum production needed to cover all expenses (break-even point).