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16 April, 16:20

Which of the following is true if the volume of sales increases (within a relevant range) ? total variable cost increases total fixed cost increases total fixed cost decreases total variable cost decreases

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  1. 16 April, 16:58
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    total variable cost increases

    Explanation:

    Variable cost refers to the expenses that change with production volume. There is a direct relationship between variable costs and the level of production. An increase in the output level will result in a rise in variable costs. For sales volume to increase, the output level must have been high.

    A high production level is necessary to support a high sales volume. Examples of variable costs are packaging and raw materials. A high output level will require the use of a large volume of raw materials, hence higher costs. Fixed cost contrast variable costs, as they do not change with varying output.
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