Total variable costs change in direct proportion to changes in cost driver volume.

Question

Quizplus · Accepted Answer

This statement is one of the basic assumptions underlying the concept of variable costs in cost accounting. The term "variable" implies that the cost changes as the volume of activity changes. For example, if a company's direct material costs are $1 per unit produced, and it produces 100 units, the total variable cost of materials is $100. If the company increases production to 200 units, the total variable cost of materials will be $200, as the cost per unit remains constant. Therefore, total variable costs change in direct proportion to changes in cost driver volume.

Total Variable Costs Change in Direct Proportion to Changes in Cost