As the level of activity increases within the relevant range,
A) total fixed costs increases.
B) fixed costs per unit decreases.
C) total variable costs remain unchanged.
D) variable costs per unit decreases.

Question

Quizplus · Accepted Answer

As the level of activity increases within the relevant range, fixed costs remain constant while the total number of units produced increases. Therefore, fixed costs are spread over more units, resulting in a decrease in fixed costs per unit. The total fixed costs do not increase. Variable costs per unit may or may not decrease depending on the situation. Total variable costs will increase as the level of activity increases.

As the Level of Activity Increases Within the Relevant Range