As Output Increases, Average Cost Decreases Continually Because

question 81

Multiple Choice

As output increases, average cost decreases continually because

• A) average variable cost per unit is increasing.
• B) average fixed cost per unit is decreasing.
• C) total variable cost is increasing.
• D) total variable cost is decreasing.
• E) total fixed cost is reducing.

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Definitions:

Variable Manufacturing Costs

Costs that vary directly with the level of production output, such as raw materials and direct labor.

Break-Even Point

The point at which total revenues equal total costs, meaning no profit or loss is incurred.

Fixed Costs

Expenses that do not change in proportion with the activity of a business, such as rent, salaries, and insurance.

Units

A measure of quantity, whether referring to the products manufactured, services provided, or another quantifiable resource.