An increase in the level of activity will have the following effects on unit costs for variable and fixed costs:
Unit Variable Cost Unit Fixed Cost
A) Increases Decreases
B) Remains constant Remains constant
C) Decreases Remains constant
D) Remains constant Decreases

Question

Quizplus · Accepted Answer

As activity level increases, unit variable costs remain constant because they are incurred per unit of activity. However, unit fixed costs decrease because the total fixed costs are spread over more units.

An Increase in the Level of Activity Will Have the Following