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The Grelle Company’s total variable costs increased by 30% in June. You have been asked what could have caused this increase. What will you report as the reason? (A) a 30% increase in activity levels (B) a 30% decrease in activity levels (C) a 15% decrease in costs per unit (D) a 30% decrease in fixed costs

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Answer:

The correct answer is A.

Explanation:

Giving the following information:

The Grelle Company’s total variable costs increased by 30% in June. You have been asked what could have caused this increase.

There are two reasons for an increase in the TOTAL variable cost. The first one is an increase in the unitary variable cost. The second reason is an increase in the production of units. Both can happen at the same time.

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