A variable cost is a cost that
A) varies per unit at every level of activity.
B) occurs at various times during the year.
C) varies in total in proportion to changes in the level of activity.
D) may or may not be incurred depending on management's discretion.

Question

Quizplus · Accepted Answer

A variable cost is a cost that varies in total in proportion to changes in the level of activity. This means that as production or sales increase or decrease, variable costs will also increase or decrease accordingly. Variable costs are associated with the cost of materials, labor, and other inputs that directly vary with production or sales levels. Therefore, A) is partially correct, but it does not reflect the proportionality aspect of variable costs. B) and D) are incorrect as they do not accurately describe the nature of variable costs.

A Variable Cost Is a Cost That