The variable cost per unit remains the same as the volume of activity decreases within the relevant range. The total variable cost will decrease as the volume of activity decreases; but the per unit cost will remain the same. The unit fixed cost will not remain the same as the volume of activity decreases within the relevant range. The total fixed cost will remain the same, but the per unit fixed cost will increase as the volume of activity decreases within the relevant range. The total variable cost will decrease as the volume of activity decreases within the relevant range. The average cost per unit will not remain the same as the volume of activity decreases within the relevant range. The average cost per unit is the total cost for all units produced divided by the number of units produced. The total cost for all units produced will consist of some fixed and some variable costs. The fixed cost will not change as the production decreases, so the per unit average fixed cost included in the average cost per unit will increase as production decreases. That will cause the average cost per unit to also increase.
|