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Financial & Managerial Accounting
Found in: Page 832
Financial & Managerial Accounting

Financial & Managerial Accounting

Book edition 7th
Author(s) John J Wild, Ken W. Shaw, Barbara Chiappetta
Pages 1096 pages
ISBN 9781259726705

Short Answer

When output volume increases, do variable costs per unit increase, decrease, or stay the same within the relevant range of activity? Explain.

Answer

Variable cost per unit is not affected by an increase in output volume.

See the step by step solution

Step by Step Solution

Step-By-Step SolutionStep 1: Definition of Cost of Goods Sold

The cost incurred by the business entity in manufacturing the goods sold to the customer is included in the cost of goods sold. It includes the only direct cost associated with the production.

Step 2: Effect of increase in volume over variable cost

The variable cost per unit will remain the same even if the output volume increases. An increase or decrease in the output volume will affect the business entity's total variable cost rather than the variable cost per unit.

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