Question

Last year, Wesson Company sold 10,000 units of its only product. If sales decrease by 15% in the current year, how will unit variable cost and unit fixed cost be affected? Unit Variable Cost - Unit Fixed Cost
A) Remains constant - Remains constant
B) Increases - Decreases
C) Decreases - Remains constant
D) Remains constant - Decreases
E) Remains constant - Increases

Answer 1

Answer:

The correct answer is c.

Explanation:

 If 1,500 units were sold this year less (15% of 10,000)

This means that by producing 1500 units less fewer direct materials, less direct labor, less commissions to sellers, less direct taxes and variable storage costs and any other expenses that are modified to produce 1 less unit or one more unit were acquired . in the production of 1500 units, therefore the variable costs decrease.

On the other hand, regardless of the quantity of units produced, the fixed costs will not be affected, since these must be canceled regardless of the level of activity, such as the rental of the business, administration salaries, fixed taxes, among others)