What is the difference between average fixed cost and average variable cost?

What is the difference between average fixed cost and average variable cost Introduction: The Crucial Role of Cost Analysis Hello everyone! In the world of business, understanding costs is paramount. It allows companies to make informed decisions, optimize operations, and ultimately, enhance profitability. Today, we'll delve into two fundamental cost components: average fixed cost and average variable cost. While they may sound similar, they have distinct characteristics and implications. Let's explore! Defining Average Fixed Cost To begin, average fixed cost refers to the fixed expenses a company incurs per unit of output. These costs remain constant, regardless of production levels. Examples include rent, insurance, and salaries. As the name suggests, the average fixed cost is calculated by dividing the total fixed cost by the quantity produced. It's important to note that while the average fixed cost per unit decreases as production increases, the total fixed cost remains constant. Understanding Average Variable Cost