Under marginal costing, variable costs may decrease due to economies of scale or increase due to higher costs, meaning they are not strictly constant.

• A. True
• B. False
• C. They always decrease with scale
• D. They are not affected by scale

Answer: (A)

Variable costs are the costs that change with output, so as production scales up or down, the total variable cost moves accordingly. In real situations, the cost per unit of a variable cost can also shift with scale: economies of scale can lower the per-unit variable cost as volume increases, while higher costs such as overtime, step costs, or input price changes can raise it. Because of these possibilities, variable costs are not guaranteed to be strictly constant across all levels of output. In practice, margins often use a constant per-unit variable cost within a relevant range for simplicity, but the underlying behavior acknowledges that variable costs can decrease with scale or increase with higher costs. So the statement is true.