Variable costs:
A) vary indirectly with changes in activity level.
B) vary directly with changes in activity level.
C) vary on a per unit basis.
D) vary indirectly with changes in activity level AND vary on a per unit basis.

Question

Quizplus · Accepted Answer

Variable costs are costs that change in direct proportion to changes in activity level. As the activity level increases, the variable costs also increase, while they decrease as the activity level decreases. For example, the cost of materials used to produce a product is a variable cost that increases as the volume of production increases.

Variable Costs