Which one of the following statements concerning variable costs is correct?
A)Variable costs minus fixed costs equal marginal costs.
B)Variable costs are equal to fixed costs when production is equal to zero.
C)An increase in variable costs increases the operating cash flow.
D)Variable costs are inversely related to fixed costs.
E)Variable costs per unit are inversely related to the contribution margin per unit.

Question

Quizplus · Accepted Answer

Variable costs per unit are inversely related to the contribution margin per unit. This is because the contribution margin per unit is the difference between the price per unit and the variable cost per unit, so as variable costs per unit increase, the contribution margin per unit decreases.

Which One of the Following Statements Concerning Variable Costs Is