What does an increase in sales volume generally result in?

An increase in sales volume typically leads to an increase in total variable costs. This is because variable costs are directly associated with the number of units produced or sold. As more units are sold, the expenses that vary with production—such as raw materials and direct labor—also rise proportionally. For example, if a company sells more products, it will need to purchase more materials and might require additional labor to meet the demand, leading to higher variable costs.

While fixed costs remain constant regardless of the sales volume—meaning they do not decrease as sales increase—contribution margin per unit generally remains the same, leading to a constant contribution margin ratio when analyzed per unit. Contribution margin itself would increase in total as sales volume increases, assuming sales price and variable costs per unit remain unchanged. Thus, the statement that an increase in sales volume results in an increase in total variable costs is accurate, as it reflects the fundamental relationship between sales volume and variable expenses.