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Poterhouse company incurs both fixed and variable production costs. assuming that production is within the relevant range if volume goes up by 28% the the total varibale cost would_______________.

A) increase by 20%.
B) remain the same.
C) increase by an amount less than 20%.
D) decrease by 20%.

Respuesta :

gbenewaeternity

Answer:

There is a mistake in your percentage volume. You used 28% in the question and then you used 20% in your options. You are supposed to maintain the same percentage volume.  

These are the answers I can give you:

1.  If the volume goes up by 28%, the total variable cost would increase by 28%

2.   If the volume goes up by 20%, the total variable cost would increase by 20%

Explanation:

Variable cost is the cost which changes if there is a change in production. It can increase and decrease depending on the situation at the moment and the production volume.

Variable cost includes cost of raw materials, labour cost, commission etc.

The increase in volume of production normally brings about increase in the total variable cost while the decrease in the production volume will bring about decrease in the total variable cost.

kaancceylan

Answer:

The answer is A.

Explanation:

Variable cost is an economic term that is used to describe the cost change as the production rate of product changes. Basically variable cost moves in the direction that the production amount does.

In the given example it is stated that the production volume goes up by 28% so the total variable cost is also going to increase, therefore the answer is option A. The variable cost would increase by 28%.

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