Higher level of production leads to

The correct answer is: B. higher setup cost

A higher level of production leads to a higher setup cost because it requires more time and resources to set up the production line. The setup cost is the cost of preparing the production line for a new production run. It includes the cost of labor, materials, and equipment. The setup cost is a fixed cost, which means that it does not change with the number of units produced. However, the higher the level of production, the more frequently the production line needs to be set up, which leads to a higher total setup cost.

The other options are incorrect because they do not take into account the cost of setting up the production line.

• Option A: higher repair cost. This is incorrect because the level of production does not affect the cost of repairs. Repairs are needed to fix defects in the products, and the number of defects is not affected by the level of production.
• Option C: lower repair cost. This is incorrect for the same reason as option A.
• Option D: higher setup cost. This is the correct answer because the level of production does affect the cost of setup.