Enter the monthly average price ($) and the tender base price of fuel ($) into the Calculator. The calculator will evaluate the Fuel Adjustment Factor.
Fuel Adjustment Factor Formula
FAF = AP - TBP
Variables:
- FAF is the Fuel Adjustment Factor ($)
- AP is the monthly average price ($)
- TBP is the tender base price of fuel ($)
To calculate Fuel Adjustment Factor, subtract the tender base price of the fuel from the monthly average price.
How to Calculate Fuel Adjustment Factor?
The following steps outline how to calculate the Fuel Adjustment Factor.
- First, determine the monthly average price ($).
- Next, determine the tender base price of fuel ($).
- Next, gather the formula from above = FAF = AP – TBP.
- Finally, calculate the Fuel Adjustment Factor.
- After inserting the variables and calculating the result, check your answer with the calculator above.
Example Problem :
Use the following variables as an example problem to test your knowledge.
monthly average price ($) = 500
tender base price of fuel ($) = 400
Frequently Asked Questions
What is the importance of calculating the Fuel Adjustment Factor?
Calculating the Fuel Adjustment Factor (FAF) is crucial for businesses and consumers to adjust for fluctuations in fuel prices over time. This ensures that contracts or agreements that involve fuel purchases can remain fair and reflective of current market conditions.
How often should the Fuel Adjustment Factor be recalculated?
The FAF should ideally be recalculated monthly or whenever there is a significant change in fuel prices. This frequency ensures that the adjustment factor remains accurate and relevant to the current market prices.
Can the Fuel Adjustment Factor be negative?
Yes, the Fuel Adjustment Factor can be negative if the tender base price of fuel is higher than the monthly average price. This indicates that the cost of fuel has decreased from the base price set in the agreement.
