Frequently Asked Questions(FAQ)

How are fixed costs treated in accounting?

Fixed costs in accounting are associated with the basic overhead and operating costs of a company. They are classified as indirect production costs, which means they are not associated directly with the production process.

What is the average fixed cost?

The average fixed cost is the same as the fixed cost per unit of production. It can be found by dividing the sum of all fixed costs by the number of units produced.

How is the average fixed cost calculated?

The average fixed cost can be calculated by adding together individual fixed costs and dividing the sum by the output level, or the total number of units produced.

How are fixed costs different from total costs?

Total costs consist of both fixed and variable costs. While both total and variable costs depend on the number of units produced, fixed costs remain constant regardless of the production levels. 

About the Authors

Tetiana Sitiugina-Babiuk

Written by: Tetiana Sitiugina-Babiuk

Financial Sector Specialist and Content Strategist

Independent writer, content strategist, and financial sector specialist. Tatiana has an extensive experience in working with financial institutions such as Bank of Canada and Risk Management unit at FinDev Canada. She holds an MA in Financial Risk Management from the University of Toronto.

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