Ardie Inc. manufactures widgets. This year was a great year with a increase in b

Question

Ardie Inc. manufactures widgets. This year was a great year with a increase in both sales and production volume. In addition, the cost per unit dropped significantly from the prior year. These facts (probably) imply that:

A. total variable costs decreased in the current period

B. variable costs are a large percentage of cost of goods sold.

C. cost of goods manufactured is relatively small in the current period.

D. there are significant fixed costs in Ardie's cost structure.

E. None of these answers are correct

Explanation / Answer

There are significant fixed costs in Ardie's cost structure. Fixed costs per unit decrease with increase in production volume. Option D is correct

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