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Why does variable cost per unit stay the same but total cost varies with the number...

Why does variable cost per unit stay the same but total cost varies with the number of units you produce? How do you choose what activity base to use?

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Answer #1

variable cost or marginal cost as it name suggest varies with the level of production, it is fixed per unit but in total value its keep on changing as the level of production will change because elements of cost related to variable cost are variable in nature and any change in the number of quantity produced, incur changes in total variable cost

variable cost per unit = material cost per unit + direct labor cost per unit + variable manufacturing overhead per unit

total variable cost = number of units produced*variable cost per unit

2-Activity base under activity based costing is used by using various kinds of activities used in the production and on the basis of various cost drivers related to different activities related to overheads are used as a base to allocate the fixed manufacturing overhead into Activity based costing.

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