ECONOMICS

Detailed explanation-1: -The correct answer is C). Fixed costs. The nature of fixed costs is to remain constant; it will not vary with the output level.

Detailed explanation-2: -In a flexible budget, those expenses that do not change within a sales range appear primarily as fixed costs. One example is maintenance and cleaning. The costs that change significantly based on sales appear primarily as variable costs and show as percentages of sales.

Detailed explanation-3: -Fixed costs on a budget are costs that never change. Varying costs are costs that can change. An example of a flexible budget would be a business whose rent is always the same (a fixed cost) but whose inventory costs fluctuate (a varying cost) based on sales.

Detailed explanation-4: -Answer and Explanation: Within the relevant range, the total fixed cost remains the same regardless of the level of activity. When the productions levels increase, the fixed cost is spread across the additional units. So, the fixed cost per unit will decrease as the level of activity increases.

Detailed explanation-5: -When the activity level decreases, the fixed costs remain the same, but the variable costs decline. The variable cost per unit will be multiplied by the activity level to ascertain the total variable cost. In this way, there will be a reduction in variable costs. Hence, the total costs would decrease.