Question

Which one of the following statements is not true? A. Total fixed costs remain the same regardless of volume within the relevant range. B. Total variable costs change with volume. C. Total variable costs decrease as the volume increases. D. Fixed costs per unit increase as the volume decreases. E. Variable costs per unit remain the same regardless of the volume.

Answer 1

Answer: Option(C) is correct.

Explanation:

Correct option: Total variable costs decrease as the volume increases is not true.

For example:

suppose there are price per unit = $4 and volume = 20000

so, total variable cost = $80000

and if volume increases to 40000 units at same price, then

total variable cost = $160000

This clearly shows that as the volume of units increases, total variable cost also increases.

All the other statements are true.