Read the passage carefully and answer the questions based on the passage:

Macroeconomic Variables

Akriti Manufacturing Company produces flower vases. The cost of production for 100 vase includes rent of Rs. 10,000, salary for permanent staff of Rs. 10,000, cost of Labour Rs. 12,000 and Raw material of Rs. 18,000. Due to increased demand of vases the company plans to increase production to 200 vases. The variable cost per vase remains Rs. 300 and the fixed cost does not change.

If the production is increased to 300 vases, what will happen to Fixed cost per unit?

Fixed cost will decrease.

The correct answer is Option (4) → Fixed cost will decrease.

Fixed costs are costs that do not change with the level of output. In the given case, fixed costs include rent and salary, which total Rs. 20,000. When production increases, the fixed cost is spread over more units, which means the fixed cost per unit decreases.

For example:

• At 100 vases: Fixed cost per unit = 20,000 ÷ 100 = Rs. 200

• At 300 vases: Fixed cost per unit = 20,000 ÷ 300 ≈ Rs. 66.67

So, while total fixed cost remains the same, the fixed cost per unit falls as output increases.