Per-Unit Cost Rates Remain Unchanged with Output Volume

Steps:

• Identify fixed costs as constant in total but absorbed at a predetermined per-unit rate from the budget.
• Note that higher actual output lowers the actual incurred fixed cost per unit but keeps the budgeted absorption rate the same.
• Recognize variable costs as proportional to output, with per-unit rate constant and total scaling with volume.
• Compare to budgeted figures: per-unit rates for both fixed and variable match, while totals and actual per-unit incurred differ.

Why C is correct:

• In standard costing, the predetermined fixed overhead absorption rate per unit and the variable cost per unit rate are set in the budget and applied unchanged to actual output.

Why the others are wrong:

• A: Total fixed cost per unit (actual incurred) decreases with higher output, differing from the budgeted rate.
• B: Total variable cost rises proportionally with increased output, exceeding the budgeted total.
• D: Total variable cost increases with output, not matching the budgeted amount for lower volume.

Final answer: C