Wu Company incurred $40,000 of fixed cost and $50,000 of variable cost when 4,000 units of product were made and sold. If the company's volume doubles,the company's total cost will:
A) stay the same.
B) double as well.
C) increase but will not double.
D) decrease.

Question

Quizplus · Accepted Answer

The fixed cost of $40,000 remains the same regardless of the volume. However, the variable cost of $50,000 will increase proportionally with the volume. Doubling the volume means that the company will make and sell 8,000 units. Therefore, the total cost will increase but not double since the fixed cost will remain the same, and the variable cost will increase proportionally. So, the answer is C, "increase but will not double."

Wu Company Incurred $40,000 of Fixed Cost and $50,000 of Variable