A variable cost will stay constant on a per unit basis as the volume increases.

Question

BlackTom AI · Accepted Answer

Consider the statement in the question about variable costs and how they behave as volume changes.
Option 1: True. The defining property of variable costs is that they change in total in direct proportion to the level of activity or volume, but the cost per unit remains constant. In other words, if you produce more units, total variable cost increases, while the variable cost per unit does not rise or fall simply due to increased volume.
Option 2: False. This would imply that either total variable cost changes independently of volume or that the cost per unit changes with volume, both of which contradicts the standard characterization of variable costs where the per-unit variable cost is constant regardless of output level.
A helpful way to think about it is to separate total cost from per-unit cost: total variable cost = (variable cost per unit) × (number of units). As volume goes up, total variable cost goes up, but the per-unit amount stays the same.
Therefore, the statement asserts that the per-unit variable cost remains constant as volume increases, which aligns with the fundamental definition of variable costs.

A variable cost will stay constant on a per unit basis as the volume increases.

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