Question

Last year, Gordon Company sold 20,000 units of its only product. If sales decrease by 20% in the current year, how will unit variable cost and totalfixed cost be affected? Unit Variable Cost Total Fixed Cost A) Remains constant Remains constant B) Increases Decreases C) Decreases Remains constant D) Remains constant Decreases E) Remains constant Increases

Answer 1

A) Remains constant Remains constant

Step-by-step explanation:

When the production level changes, the variable cost per unit and the fixed cost per unit remain constant.

But if we say about the total variable cost, then it would be changed according to the production level as it shows a direct relationship between the total variable cost and the production level.

The total fixed cost would remain the same whether production level changes or not.