When the level of activity increases within the relevant range, how does each of the following change
A)Average cost per unit INCREASES; Total variable cost INCREASES; Fixed cost per unit INCREASES
B)Average cost per unit INCREASES; Total variable cost - NO CHANGE; Fixed cost per unit INCREASES
C)Average cost per unit DECREASES; Total variable cost - NO CHANGE; Fixed cost per unit DECREASES
D)Average cost per unit DECREASES; Total variable cost INCREASES; Fixed cost per unit DECREASES

Question

Quizplus · Accepted Answer

When the level of activity increases within the relevant range, the average cost per unit decreases due to economies of scale, total variable cost increases because it varies with the level of activity, and fixed cost per unit decreases because the same amount of fixed costs is spread over more units.

When the Level of Activity Increases Within the Relevant Range