Question

Regarding overhead costs, as volume increases: Unit variable cost decreases, unit fixed cost remains constant. Unit fixed cost decreases, unit variable cost increases. Unit fixed cost increases, unit variable cost decreases. Both unit fixed cost and unit variable cost remain constant. Unit fixed cost decreases, unit variable cost remains constant.

Answer 1

Option (5) is correct.

Step-by-step explanation:

Now as per the overhead costs, when there is an increase in the volume of production then as a result fixed costs remains the same at the installed level but afterwards it falls and unit variable cost remains the same at the increased level of production.

So, the correct option is unit fixed cost decreases, unit variable cost remains constant.