What is the fixed cost per acre in this scenario?

What is the fixed cost per acre in this scenario?

• A. $100
• B. $200
• C. $300
• D. $400

Answer: (B)

Fixed costs stay the same no matter how much you produce, so the per-acre fixed cost is found by spreading the total fixed costs across all acres. To get the fixed cost per acre, you divide total fixed costs by the number of acres. In this scenario, that division yields the per-acre amount that matches the data given, which is why it’s the correct choice. Keep in mind that the per-acre fixed cost will go down if you increase acres (with fixed costs fixed) and go up if you decrease acres. The other numbers wouldn’t align with the calculated F divided by A, so they don’t fit the scenario.

Fixed costs stay the same no matter how much you produce, so the per-acre fixed cost is found by spreading the total fixed costs across all acres. To get the fixed cost per acre, you divide total fixed costs by the number of acres. In this scenario, that division yields the per-acre amount that matches the data given, which is why it’s the correct choice. Keep in mind that the per-acre fixed cost will go down if you increase acres (with fixed costs fixed) and go up if you decrease acres. The other numbers wouldn’t align with the calculated F divided by A, so they don’t fit the scenario.