Question

Variable Cost: A)increases on a per unit basis as the number of units produced increase B)Remains constant on a per unit basis as the number of units produced increases C)remains the same in total as production increases D)decreases on a per unit basis as the number of units produced increases

1) increases on a per unit basis as the number of units produced increase
2) Remains constant on a per unit basis as the number of units produced increases
3) remains the same in total as production increases
4) decreases on a per unit basis as the number of units produced increases

Answer 1

Variable costs remain constant on a per unit basis as the production volume increases. They vary in total but are stable per unit, which includes costs related to labor and raw materials.

Step-by-step explanation:

Variable costs refer to expenses that change in proportion to the activity of a business. In this context, variable costs would include raw materials, labor, and any other inputs that can be increased or decreased with the level of output. Variable costs remain constant on a per unit basis as the number of units produced increases. This means that the cost per unit does not change as production scales up or down - it 'varies' in total but not per unit.

For instance, the cost of labor will increase if more workers are hired to meet higher production demands, meaning that the total variable cost will rise as more units are produced. However, the cost of labor per unit of product typically remains steady. The same applies to materials; as more units are produced, more materials are required, thus increasing the total variable cost, but the cost of materials per unit remains the same, assuming stable prices.