When the activity level is expected to decline with the rele

When the activity level is expected to decline with the relevant range, what effects would be anticipated with respect to each of the following?

A. Fixed cost per unit - increase; Variable cost per unit - No change.

B. Fixed cost per unit - increase; Variable cost per unit - Increase.

C. Fixed cost per unit - No change; Variable cost per unit - No change.

D. Fixed cost per unit - No change; Variable cost per unit - Increase.

Solution

Fixed cost in total remains the fixed

Fixed cost per unit increase when activity level decline

Whereas Fixed cost per unit decreases when activity level increase

Where as variable cost per unit remains the same irrespective of increase or decrease in activity level

So as the activity level decerase in problem

So fixed cost per unit will Increase and variable cost per unit will remain same no change

So correct answer is A