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John Moffat.
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zaramujeeb
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A company has a production cost which has both fixed and variable elements.
The following statements refer to the behaviour of the coat when activity levels change. Are the statements true or false?
1. When activity levels change, total variable costs remain constant
2. When activity levels fall, total cost per unit increases
Total variable costs change as activity levels change & when activity levels fall total cost per unit increases. So only statement 2 is correct?
John Moffat
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Yes – only statement 2 is correct (as is explained in my free lectures).
But again, why are you attempting a question for which you do not have an answer? 🙂
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