Question

10) Within the relevant range, variable costs can be expected to: A) vary in total in direct proportion to changes in the activity level. B) remain constant in total as the activity level changes. C) increase on a per unit basis as the activity level increases. D) increase on a per unit basis as the activity level decreases.

Answer 1

Answer:

A. Vary in total in direct proportion to changes in activity level

Explanation:

Variable cost is a cost that varies with the level of out put. In other words, it is a cost that increases/decreases as output level increases/decreases.

Variable costs are dependent on output hence a constant amount per unit produced. It means that as more and more products are produced, variable costs will also increase; also as fewer products are produced, variable costs also decreases. Examples of variable costs are utility costs, costs of raw materials used in production, sales commission , direct labor costs etc.