Yesterday, the president of the company in which you are cost accountant held a meeting of managers. She expressed some concern that variable costs were increasing because volume was going down. She gave as an example the fact that depreciation costs per unit of product had increased from $4.34 per unit to

$4.89 per unit, largely because of a decrease of about 10 percent in the volume of the product. She did, however, express her appreciation for the fact that some fixed costs, most notably materials costs, had increased very little. Materials costs had been $15 per unit during the past year, and during the past month, they had been held to $15.10 per unit, despite lower volume.

What is your reaction to the president's remarks?

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