ENTREPRENEURIAL OPERATIONS
PRODUCTION PLANNING AND CONTROL
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Equal to contribution per unit.
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Zero
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Equal to fixed costs.
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Equal to selling price per unit.
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Detailed explanation-1: -When the output is equal to zero, the variable cost is zero. Variable costs are those that depend on the level of output. The fixed costs are those that are present even when production is zero, and therefore the variable cost is zero when output is zero.
Detailed explanation-2: -The cost incurred on variable factors of production is called Total Variable Cost (TVC). These costs vary with the level of output or production. Thus, when production level is zero, TVC is also zero.
Detailed explanation-3: -In the short-run, when the output is equal to zero (when there is no production), the total variable cost is also equal to zero.
Detailed explanation-4: -Variable cost is the cost that changes with the change in the level of output. Therefore, if the firm produces no output, the variable cost incurred becomes zero.