Porterhouse Company has both fixed and variable production costs.If volume goes up by 20%,how would that affect the total of all costs? (Assume all volumes are within the relevant range.)

Question

Quizplus · Accepted Answer

When volume increases by 20%, variable costs will also increase proportionally. However, fixed costs will remain the same as they do not change with the level of production. Therefore, the total of all costs would go up by some amount less than 20%, which is the increase in variable costs.

Porterhouse Company Has Both Fixed and Variable Production Costs