A Leased Factory Building Has a Fixed Monthly Rental Payment

question 123

Multiple Choice

A leased factory building has a fixed monthly rental payment, and a variable overhead cost of energy and indirect labour.Which of the following is TRUE, assuming that all activity levels are within the relevant range?

• A)Variable OVH costs will increase as production increases, but Fixed OVH costs will decrease.
• B)Variable OVH costs will decrease as production increases, but Fixed OVH costs will increase.
• C)Variable OVH costs will increase as production increases, and Fixed OVH costs will increase.
• D)Variable OVH costs will increase as production increases, but Fixed OVH costs will remain constant.
• E)Both will increase with production, but at different rates.