Total variable costs change in proportion to changes in volume of activity.

Question

Quizplus · Accepted Answer

Total variable costs are those costs that change in proportion to changes in the volume of activity, meaning they increase or decrease as the level of production or sales changes. This is because variable costs are directly linked to the level of activity, such as the amount of materials, labor or utilities used. In contrast, fixed costs remain the same regardless of the level of activity, such as rent or salaries, which would be considered as irrelevant costs in the short-term decision-making.

Total Variable Costs Change in Proportion to Changes in Volume