A cost that changes in proportion to changes in volume of activity is a(n):
A) Incremental cost.
B) Product cost.
C) Fixed cost.
D) Variable cost.
E) Differential cost.

Question

Quizplus · Accepted Answer

A cost that changes proportionally with the change in volume of activity is a variable cost. Variable costs are expenses that are associated with the production of goods or services and will fluctuate based on the volume of output. Examples include materials, labor, and electricity. Incremental costs refer to the additional cost that is incurred due to a decision, product costs are the direct costs of producing a product, fixed costs remain constant regardless of volume, and differential costs refer to the difference in cost between alternatives.

A Cost That Changes in Proportion to Changes in Volume