As the level of activity moves outside of the relevant range, fixed costs:

• A. always decrease in total as activity increases
• B. are treated as variable costs in all accounting systems
• C. may change in total due to the need for additional capacity or resources
• D. remain constant per unit regardless of activity level

Answer: (C)

Verified step by step guidance

1. Understand the concept of fixed costs: Fixed costs are expenses that do not change in total with changes in the level of activity within a certain range, known as the relevant range.
2. Define the relevant range: The relevant range is the range of activity within which fixed costs remain constant in total. Outside this range, fixed costs may change due to operational adjustments.
3. Analyze the behavior of fixed costs outside the relevant range: When activity moves outside the relevant range, fixed costs may increase or decrease in total due to the need for additional capacity (e.g., hiring more staff, purchasing new equipment) or scaling down operations.
4. Clarify the distinction between fixed costs and variable costs: Fixed costs do not become variable costs outside the relevant range. Instead, they may change in total due to operational needs, but their nature as fixed costs remains unchanged.
5. Conclude with the correct answer: Fixed costs may change in total due to the need for additional capacity or resources when activity moves outside the relevant range.