Question

As the volume of activity changes, a(n) ________ cost changes when expressed on a per unit basis

Answer 1

Variable costs change on a per unit basis as the volume of activity changes.

Step-by-step explanation:

As the volume of activity changes, a variable cost changes when expressed on a per unit basis. Variable costs are the costs that vary with the level of output or production. They increase or decrease in proportion to the quantity of goods or services produced.

Answer 2

A variable cost changes on a per unit basis as the volume of activity changes. Average cost and marginal cost are two methods to measure per unit costs, the former being the total cost divided by output and the latter being the cost of producing one more unit.

Step-by-step explanation:

As the volume of activity changes, a variable cost changes when expressed on a per unit basis. When production is zero, the fixed costs, such as $160, are still incurred. However, as production increases, variable costs are added to fixed costs, with total costs being the sum of the two. Variable costs include expenses such as labor and raw materials, which fluctuate with the level of output.

The cost per unit of output can be measured by average cost (AC) and marginal cost (MC). The average cost is calculated by dividing the total cost (TC) by the quantity of output produced (AC = TC/Q), while marginal cost represents the cost of producing one additional unit of output, defined as the change in total cost divided by the change in output (MC = ∆TC/∆Q).

For example, if producing two widgets costs a total of $44, the average cost per widget is $22. If the cost increases to $44 from $32.50 for the second widget, the marginal cost of the second widget is $11.50. These calculations provide businesses with insight into their cost structure as they adjust the levels of production.