Introduction:

Understanding cost behavior is crucial in managing production and financial performance in

manufacturing.

Cost Characteristics:

Fixed costs remain constant in total but vary per unit with changes in production volume.

Variable costs vary directly with production volume but remain constant per unit.

Options Analysis:

Option A: Variable costs per unit remain constant regardless of production volume.

Option B: Fixed costs per unit decrease as production volume increases, not directly.

Option C: Total variable costs vary directly with production volume, not inversely.

Option D: Fixed costs per unit will decline as the number of units produced increases due to the

spreading of fixed costs over a larger number of units.

Conclusion:

When production increases by 30%, the fixed cost per unit will decline as the same total fixed cost is

allocated over a greater number of units.

Reference:

Cost Accounting Standards and Practices .