Question

Which of the following is true if the volume of sales increases (within a relevant range)? total variable cost increases total fixed cost increases total fixed cost decreases total variable cost decreases

Answer 1

Answer:

total variable cost increases

Explanation:

Variable cost refers to the expenses that change with production volume. There is a direct relationship between variable costs and the level of production. An increase in the output level will result in a rise in variable costs. For sales volume to increase, the output level must have been high.

A high production level is necessary to support a high sales volume. Examples of variable costs are packaging and raw materials. A high output level will require the use of a large volume of raw materials, hence higher costs. Fixed cost contrast variable costs, as they do not change with varying output.