As activity level increases, fixed cost per unit c. does not change
What is fixed cost?
Fixed costs are costs that stay the same even if the amount of activity or production changes. These costs stay the same no matter how much a business produces or how busy it is. Instead, these costs happen whether the business is making a lot of products or not making as many.
Some examples of fixed costs are rent, salaries of permanent employees, insurance payments, property taxes, and equipment depreciation. These costs are usually linked to keeping a business running and in good shape.
Because fixed costs stay the same no matter how much we do, the cost for each unit will always be the same. This means that when you make more stuff, the total costs stay the same, but the cost for each thing you make goes down. On the other hand, if the amount of work decreases, the total amount of fixed costs stays the same, but the cost for each unit goes up.