B) Both variable and fixed costs were the two major costs incurred by Home Depot that were likely affected by the decline in sales. According to our text, we know that fixed costs are cost in the organization that do not change with the level of production for the company (Edmonds, Tsay, & Olds, 2011). Fixed cost per unit versus total cost behave differently. There is an inverse relationship. As volume increase, fixed cost per unit decreases. This has to do with the cost behavior. So, as the sales revenue decreased, the fixed cost per unit increased. Variable costs change with the level of production. As output rises, variable costs rise. The cost per unit for variable costs remains constant. So, because of the operating leverage,
