Question

Which of the following statements is true?

Multiple Choice

• Fixed costs are constant in total dollars.

• Fixed costs are constant on a per unit basis.

• Variable costs per unit decrease as activity volume increases.

• Variable costs are constant in total dollars.

Answer 1

FIXED COSTS ARE CONSTANT IN TOTAL DOLLARS

Fixed cost remain constant and but it changes when the per unit increases or decreases. As the volume increase the per unit fixed cost decreases, if volume decreases then the per unit fixed cost increases. And the variable cost is the cost which changes according to the volume of production, if volume increases the cost will increase and if volume decreases the cost will decrease, it changes according to the change in production level.