Answer: Profitability reduces
Explanation:
Generally, variable costs increase as production increases unlike fixed costs which stay the same regardless of production volume.
If Variable costs were to increase per unit however, that would mean that the business is getting less contribution margin from its products.
The Contribution Margin is the Sales figure - Variable Cost. The higher the contribution margin, the higher the profit because even though the fixed costs will be removed from the contribution margin, they are fixed in nature.
A higher variable cost therefore means a lower Contribution Margin which means lower profitability.
