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An increase in the level of activity will have the following effects on unit costs for both variable and fixed costs: UNIT VA

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Unit Variable costs unit Fixed cost
Remains Constant Decrease

Variable cost Pe unit is always constant, Total Fixed cost is Always constant and Per Units inversely relate to the level of Activity

If Level of Activity increase

  • Per unit Variable cost is Constant
  • Per Unit Fixed cost is Decreasing
  • Total Variable cost Increase
  • Total Fixed cost is Constant
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