Regarding overhead costs, as volume increases:
A) Total variable cost decreases, total fixed cost remains constant.
B) Both total fixed cost and total variable cost increase.
C) Total fixed cost increases, total variable cost remains constant.
D) Total fixed cost remains constant, total variable cost increases.
E) Both total fixed cost and total variable cost remain constant.

Question

Quizplus · Accepted Answer

As volume increases, the total variable cost increases because more resources (materials, labor, etc.) are required to produce a larger quantity of goods or services. However, the total fixed cost remains constant because it is not affected by changes in volume in the short run. Fixed costs include expenses such as rent, salaries, insurance, and other costs that do not vary with changes in the level of output. Therefore, option D is the correct answer.

Regarding Overhead Costs, as Volume Increases