Question

If the activity level increases 10%, total variable costs will
a. remain the same.
b. increase by more than 10%.
c. decrease by less than 10%.
d. increase 10%.

Answer 1

Total variable costs will increase by 10% in response to a 10% increase in activity level.

Costs that are directly correlated with the level of activity are known as variable costs. The overall variable expenses will rise together with the activity volume.

What is total variable cost?

The total amount of labor and resources needed to make one unit of your product is what you call your variable costs. The variable cost per unit multiplied by the quantity of units generated gives you the total variable cost. Your total variable cost divided by the quantity of units produced gives you your average variable cost.

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