ECONOMICS

Detailed explanation-1: -Fixed costs do not vary with the production level. Total fixed costs remain the same, within the relevant range. However, the fixed cost per unit decreases as production increases, because the same fixed costs are spread over more units.

Detailed explanation-2: -As production levels decrease, the fixed cost per unit increases. Total fixed costs are insensitive to production and that means that fewer units produced have to bear a greater burden of overhead. Hence, fixed cost per unit is inversely related to production volume.

Detailed explanation-3: -Fixed costs do not change with increases/decreases in units of production volume, while variable costs fluctuate with the volume of units of production. Fixed and variable costs are key terms in managerial accounting, used in various forms of analysis of financial statements.

Detailed explanation-4: -The variable cost of production is a constant amount per unit produced. As the volume of production and output increases, variable costs will also increase. Conversely, when fewer products are produced, the variable costs associated with production will consequently decrease.

Detailed explanation-5: -Definition of Fixed Cost per Unit Fixed costs such as rent, salaries, depreciation, etc. generally do not change in total within a reasonable range of volume or activity. On the other hand, the fixed cost per unit will change as volume or the level of activity changes.