Question

A variable cost a. is synonymous with labor costs b. changes in the same direction and in direct proportion to changes in operation activity. c. changes in the same direction and in inverse proportion to changes in operating activity. d. changes in the opposite direction and in direct proportion to changes in operating activity.

Answer 1

Answer:

b. changes in the same direction and in direct proportion to changes in operation activity.

Explanation:

Variable costs are expenses that vary with changes in production level. A variable cost is attached to the production of a particular product or service. An example of variable cost is the raw material expense. As the production level rises, more raw materials will be needed for production.    

The relationship between variable costs and output level is direct and proportional. An increase in output requires more materials and other consumables. As variable costs are associated with the production process, an increase or decrease in production level results in a similar or increase or decrease in variable costs.