Which is a correct example of variable cost?
Answer and explanation
Correct answer: Raw material cost rising with production
A variable cost changes in total as the level of production or sales changes. If an enterprise makes more units, it normally needs more raw material, so the total raw-material cost rises. Fixed rent, an annual registration fee, and a fixed insurance payment generally do not change directly with each additional unit during the relevant period.
Frequently asked questions
What is the correct answer to this question?
Raw material cost rising with production
Why is this the correct answer?
A variable cost changes in total as the level of production or sales changes. If an enterprise makes more units, it normally needs more raw material, so the total raw-material cost rises. Fixed rent, an annual registration fee, and a fixed insurance payment generally do not change directly with each additional unit during the relevant period.
Which subject and chapter does this question cover?
This is a Class 11 Business Studies question. Chapter: MSME and Business Entrepreneurship.
