The higher the denominator level of activity:
A)the higher the cost per unit of product.
B)the lower the cost per unit of product.
C)the less likely is the occurrence of a volume variance.
D)the more profitable operations likely will be.

Question

Quizplus · Accepted Answer

The higher the denominator level of activity, the lower the cost per unit of product. This is because fixed costs are spread over a larger number of units, resulting in a lower cost per unit. Therefore, as activity levels increase, the cost per unit of product decreases.

The Higher the Denominator Level of Activity