1. What is Total Fixed Cost?

Total Fixed Cost (TFC) represents the expenses that do not change with the level of production or sales. These are costs that a business incurs regardless of its output level, such as rent, salaries, insurance, and equipment depreciation.

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: Fixed costs are calculated by subtracting all variable costs from the total costs incurred by a business during a specific period.

3. Importance of Fixed Cost Calculation

Details: Understanding fixed costs is essential for break-even analysis, pricing decisions, budgeting, and financial planning. Fixed costs help determine the minimum revenue needed to cover all expenses.

4. Using the Calculator

Tips: Enter total cost and total variable cost in currency units. Both values must be valid (non-negative) and total cost should be 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, fixed costs can change but not in response to production changes. They may increase due to inflation, contract renewals, or business expansion.

Q3: How do fixed costs affect pricing?
A: Fixed costs must be covered by the contribution margin (price minus variable cost). Understanding fixed costs helps set prices that ensure profitability.

Q4: Are all overhead costs fixed?
A: Not necessarily. While many overhead costs are fixed, some may have variable components depending on the nature of the expense.

Q5: How often should fixed costs be calculated?
A: Fixed costs should be reviewed regularly, typically during each budgeting cycle or when significant business changes occur.