Final answer:
The average fixed cost when the total fixed cost is $1,000 and 100 units are produced is $10 per unit. The concept of spreading the overhead refers to the reduction in average fixed cost as production volume increases. The average fixed cost curve is hyperbolic in shape, decreasing as output increases.
Step-by-step explanation:
If the total fixed cost is equal to $1,000 and there are 100 units being produced, the average fixed cost is calculated by dividing the total fixed cost by the number of units produced. In this case, the average fixed cost would be $10 per unit ($1,000 / 100 units).
A common name for fixed cost is overhead. When we talk about spreading the overhead, it refers to allocating the total fixed cost over an increasing number of units produced, which results in a decrease in the average fixed cost per unit. The average fixed cost curve typically looks like a hyperbola, starting at a high point when production is low and approaching zero as production volume increases, but never actually reaching zero.