When the number of units manufactured increases,the most significant change in average unit cost will be reflected as
A)an increase in the nonvariable component.
B)a decrease in the variable component.
C)a decrease in the nonvariable component.
D)an increase in the variable component.

Question

Quizplus · Accepted Answer

As the number of units manufactured increases, the fixed (nonvariable) costs are spread over more units, leading to a decrease in the average cost per unit for these nonvariable components. Variable costs per unit remain constant with changes in activity level.

When the Number of Units Manufactured Increases,the Most Significant Change