Fixed Costs Per Unit Increase with Declining Production

Steps:

• Define fixed costs as constant in total regardless of output; variable costs change proportionally with production.
• For option 1, fixed costs per unit = total fixed costs ÷ units produced; lower production increases this ratio.
• For option 2, total fixed costs remain unchanged by production levels.
• For options 3 and 4, variable costs per unit stay constant; total variable costs decrease as production falls, so per-unit figure does not rise.

Why A is correct:

• Fixed costs per unit follow the formula total fixed costs ÷ output volume; decreasing output raises the per-unit value by spreading fixed total over fewer units.

Why the others are wrong:

• B includes 3, but total variable costs per unit (likely meaning variable cost per unit) remains constant.
• C includes 2 (unchanged total fixed costs) and 4 (constant variable cost per unit).
• D picks only 4, which does not increase.

Final answer: A