Thanks for playing! That's on purpose: every time you recruit a newer knight, the older ones get more expensive, so the newest one is always the best buy. I agree it's not clear in the game though, I'll try to make it more obvious.
That doesn't work. Because of the extra cost mechanic, the ideal strategy is to only level up the first unit until level 200 (when there are no more multiplier bonuses) before buying the next unit. You already have an incentive to push towards the newest knight, which is not having any more multiplier bonuses after level 200, so the cost increase is redundant.