In the short run a firm should keep producing as long as the price covers average variable cost; below AVC it minimises losses by shutting down. AFC always falls as output rises.
How to use the Average Variable Cost Calculator
- Total variable cost
- Total fixed cost
- Quantity produced
- Market price per unit
Results update as you type, and every field accepts the units shown in its menu.
How it works
Enter total variable cost, total fixed cost and the quantity produced.
Tips
- Use consistent periods (a year or a quarter) for flow figures and period-end values for balances.
- Average opening and closing balances when a ratio mixes a flow with a stock.
- Benchmark against competitors in the same industry.
- Read the ratio together with others – profitability, liquidity and efficiency tell different stories.
Common mistakes to avoid
- Using sales instead of cost of goods sold for inventory ratios.
- Mixing gross, operating and net profit.
- Ignoring one-off items that distort a single year.
Inputs explained
| Field | What to enter |
|---|---|
| Total variable cost | Amount in your currency |
| Total fixed cost | Amount in your currency |
| Quantity produced | A number |
| Market price per unit | Amount in your currency |
What each result means
- Average variable cost (AVC) = [Total variable cost]÷[Quantity produced]
- Average fixed cost (AFC) = [Total fixed cost]÷[Quantity produced]
- Average total cost (ATC) = ([Total variable cost] + [Total fixed cost])÷[Quantity produced]
Example values
How the main result changes when Total variable cost changes and everything else stays at the example values above:
| Total variable cost | Average variable cost (AVC) |
|---|---|
| 22,500 | 15 |
| 33,750 | 22.5 |
| 45,000 | 30 |
| 56,250 | 37.5 |
| 67,500 | 45 |
| 90,000 | 60 |
Formula
AVC = total variable cost ÷ quantityAFC = fixed cost ÷ quantityATC = AVC + AFC = total cost ÷ quantityWorked example
Inputs — Total variable cost: $45,000; Total fixed cost: $30,000; Quantity produced: 1,500; Market price per unit: $42.
Results — Average variable cost (AVC) = $30.00; Average fixed cost (AFC) = $20.00; Average total cost (ATC) = $50.00; Short-run decision at this price = Loss, but cover AVC – keep producing in the short run.
Frequently asked questions
What is average variable cost?
Variable cost per unit of output.
What is the shutdown rule?
Shut down in the short run if price falls below minimum AVC.
Why does AFC fall with output?
Fixed costs are spread over more units.
What formula does the Average Variable Cost Calculator use?
AVC = total variable cost ÷ quantity.