Question

Variable cost per unit increases when ______.

Options

• Volume of production decreases

• Volume of production increases

• Cost of raw material decreases

• Tax decreases

Answer 1

Variable cost per unit increases when volume of production decreases.
Explanation:

When manufacturing volume drops, fixed expenses are spread across fewer units, potentially raising the overall cost per unit if variable costs are not strictly per unit. However, it's worth noting that this usually relates to fixed costs rather than variable expenditures. In most cases, genuine variable costs per unit should be consistent and independent of production volume.