Question

F is a fixed cost; V is a variable cost. During the current year the level of activity has decreased but is still within the relevant range. We would expect that:

Group of answer choices
a.The cost per unit of V has remained unchanged
b.The cost per unit of V has decreased
c.The cost per unit of F has remained unchanged
d.The cost per unit of F has decreased

Answer 1

The cost per unit of variable cost would increase while the cost per unit of fixed cost would remain unchanged.

Step-by-step explanation:

In this situation, where the level of activity has decreased but is still within the relevant range, the cost per unit of V (variable cost) would increase.

This is because the total variable cost (V) is spread over a smaller level of activity, resulting in a higher cost per unit.

On the other hand, the cost per unit of F (fixed cost) would remain unchanged, as fixed costs do not vary with the level of activity.