Expense A is a fixed cost; expense B is a variable cost. During the current year the activity level has increased, but it 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.
Selected: c. expense A has decreased. This answer is correct.
d. expense B has increased.
Correct! Because activity level has increased, the fixed costs will now be covering more units so the cost per unit will decrease, whereas the cost per unit of variable cost will stay the same even though the total will increase.