Which one is correct? 1. A factory supervisor's salary would be classified as an indirect cost. II. If the activity level increases, then one would expect the fixed cost per unit to decrease. III. Fixed costs should not be included in a flexible budget because they do not change when the level of activity changes IV. In a CVP graph, the anticipated profit or loss at any given level of sales is measured by the vertical distance between the total revenue line (sales) and the total fixed expense line.