If production volume increases from 8,000 to 10,000 units,how will the costs respond?
A)Total costs will increase by 20 percent.
B)Total costs will increase by 25 percent.
C)Total variable costs will increase by 25 percent.
D)Mixed and variable costs will increase by 25 percent.

Question

Quizplus · Accepted Answer

If the production volume increases from 8,000 to 10,000 units, the total variable costs will increase proportionally. The fixed costs, on the other hand, will remain the same. Therefore, the total costs will not increase by the same percentage as the increase in production volume. Instead, the total variable costs will increase by 25 percent ([(10000-8000)/8000] * 100 = 25%).

If Production Volume Increases from 8,000 to 10,000 Units,how Will