Question

Select the true statement:

a) As volume increases fixed cost per unit remains constant.
b) As volume increases variable cost per unit increases.
c) As volume increases variable cost per unit decreases.
d) As volume decreases fixed cost per unit increases.

Answer 1

B) As volume increases variable cost per unit increases.

Step-by-step explanation:

As the volume of production and output increases, variable costs will also increase because the variable cost of production is a constant amount per unit produced. Alternatively , when fewer products are produced, the variable costs connected with production will as a result decrease

Variable costs example include direct Labour and material costs

So if the company decides to increase its output (production of product) from example 50 units to 100 units, then more materials and direct Labour are needed