Average fixed Cost is found out by dividing the total fixed cost by the corresponding output. With an increase in the quantity of output produced, this average cost reduces because the fixed cost remains the same while the number of output increases.Example of the fixed cost includes the rent paid, salaries paid to the permanent employees, mortgage payments on the plant and machinery, etc. Divide the total fixed costs by the quantity of units produced. Managerial accountants use the average fixed cost formula to calculate how much costs should be allocated to each unit of production.