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 B has decreased.
C) expense A has decreased.
D) expense B has increased.

Question

Quizplus · Accepted Answer

As the activity level increases, the fixed cost per unit (expense A) decreases because the total fixed cost is spread over more units. Variable cost per unit (expense B) remains constant.

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