Commercial Applications
Total variable cost per unit increases ……………
- When production grows
- When demand decreases
- Change in government rules
- Change in availability of raw material
Cost
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Answer
When production grows
Reason — Total variable cost increases when the volume of production grows because variable cost is incurred on every additional unit produced — more units produced means more raw materials, more direct labour and more variable expenses. There is a linear relationship between volume of production and total variable cost. (Variable cost per unit, however, remains constant.)
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Related Questions
Assertion (A): Indirect costs are always fixed costs.
Reason (R): Indirect costs are expenses that cannot be directly attributed to a specific cost object.
- A is true but R is false
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- Both A and R are true and R explains A.
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Assertion (A): Indirect costs can be traced directly to a specific product or service.
Reason (R): Indirect costs are typically overheads that benefit multiple products or services.
Which of the following is correct?
- Both A and R are true, and R explains A.
- Both A and R are true, but R does not explain A.
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