Question

The difference between variable costs and fixed costs is A. Variable costs per unit are fixed over the relevant range and fixed costs per unit are variable. B. Variable costs per unit change in varying increments, while fixed costs per unit change in equal increments. C. Variable costs per unit fluctuate and fixed costs per unit remain constant. D. Total variable costs are variable over the relevant range and fixed in the long term, while fixed costs never change.

Answer 1

Answer:  A. Variable costs per unit are fixed over the relevant range and fixed costs per unit are variable.

Explanation:

Variable costs change with the level of production by a certain amount per unit which means that variable costs per unit are fixed. For instance, the variable cost of producing one bar of chocolate is $2 per unit. This cost is fixed per unit.

Fixed costs on the other hand do not change with the level of production which means that the fixed cost per unit will be variable as the number of units produced increases. For example, the fixed cost of producing chocolate bars is $100. If 10 bars of chocolate are produced, the fixed cost per unit will be 100/10 which is $10. If 20 bars of chocolate are produced however then the fixed cost per unit is 100/20 = $5. Fixed costs are therefore variable per unit.