Question

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2. Which refers to decline in the per unit cost of production as volume grows?​

Answer 1

Variable costs increase or decrease depending on a company's production volume; they rise as production increases and fall as production decreases. Examples of variable costs include the costs of raw materials and packaging. A variable cost can be contrasted with a fixed cost.

Answer 2

Answer:  Variable cost refers to decline in the per unit cost of production as volume grows.

Explanation:

Variable costs are costs that fluctuate in relation to either the amount of production  or the amount of services provided. If no production or service is provided,  there should be no variable costs. As production and services increase, so do variable costs.

Types of Variable Costs

Direct materials are considered  variable costs. Direct labor may not be a variable cost if labor is not added  or removed from the production process in response to changes in production. Most types of overhead costs are not considered  variable costs.

Example of Variable Costs

An example of  variable costs is the resin used in the manufacture of plastic products. Since resin is an important component of  plastic products, it changes in direct proportion to the number of units manufactured. As another example,  credit card fees are incurred only when a company sells a product to  a customer who pays by credit card. If there is no sale, there is no credit card fee.

Advantages of Variable Costs

If a company has a large percentage of variable costs in its cost structure,  most of that cost fluctuates in direct proportion to revenue, so it can survive a recession better than a company with a high percentage of fixed costs.

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