Use the following information to determine the gross margin for Pacific States Manufacturing for the year just ended (all amounts are in thousands ($000) of dollars: Sales $31,800 Purchases of direct materials 7,000 Direct labor 5,000 Work in process inventory, 1/1 800 Work in process inventory, 12/31 3,000 Finished goods inventory, 1/1 4,000 Finished goods inventory, 12/31 5,300 Accounts payable, 1/1 1,700 Accounts payable, 12/31 1,500 Direct materials inventory, 1/1 6,000 Direct materials inventory, 12/31 1,000 Indirect labor 600 Indirect materials used 500 Utilities expense, factory 1,900 Depreciation on factory equipment 3,500 Gross Margin _________________ 2. Which costs will change with a decrease in activity within the relevant range? A) Total fixed costs and total variable cost. B) Unit fixed costs and total variable cost. C) Unit variable cost and unit fixed cost. D) Unit fixed cost and total fixed cost