Which costs will change with a decrease in activity within the relevant range?
A) Total fixed costs and total variable cost.
B) Unit fixed costs and total variable cost.
C) Unit variable cost and unit fixed cost.
D) Unit fixed cost and total fixed cost.

Question

Quizplus · Accepted Answer

Within the relevant range, fixed costs remain the same regardless of activity levels, so total fixed costs will not change with a decrease in activity. However, unit fixed costs can decrease with a decrease in activity because the total fixed costs are spread over fewer units. On the other hand, total variable costs will decrease with a decrease in activity since there are fewer units to produce, but unit variable costs will remain the same. Therefore, only Unit Fixed Costs and Total Variable Cost will change with a decrease in activity, making choice B the correct answer.

Which Costs Will Change with a Decrease in Activity Within