Expense A is a fixed cost; expense B is a variable cost. During the current year the activity level has increased, but is still within the relevant range. In terms of cost per unit of activity, we would expect that:
A)expense A has remained unchanged.
B)expense A has decreased.
C)expense B has decreased.
D)expense B has increased.

Question

Quizplus · Accepted Answer

Expense A, being a fixed cost, would see a decrease in cost per unit of activity as the activity level increases, because the total fixed cost is spread over more units.

Expense a Is a Fixed Cost; Expense B Is a Variable