When the level of activity decreases within the relevant range, the fixed cost per unit will:
A) decrease.
B) increase.
C) remain the same.
D) The effect cannot be predicted.

Question

Quizplus · Accepted Answer

Fixed costs remain constant within the relevant range, so when the level of activity decreases, the total fixed cost remains the same while the total number of units produced decreases. Therefore, the fixed cost per unit increases.

When the Level of Activity Decreases Within the Relevant Range