Total variable costs• a. increase with a decrease in activity.O b. are constant regardless of changes in activity.• c. have no relevant range.• d. change proportionately with changes in activity levels.
Question
Total variable costs• a. increase with a decrease in activity.O b. are constant regardless of changes in activity.• c. have no relevant range.• d. change proportionately with changes in activity levels.
Solution
The correct answer is d. Total variable costs change proportionately with changes in activity levels. This is because variable costs are directly related to the level of output or activity. For example, if a company produces more goods, it will need more raw materials, which will increase the total variable costs. Conversely, if the company reduces its production, the total variable costs will decrease.
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