Costs that change directly with the level of production are referred to as ________ costs.
A) fixed
B) variable
C) target
D) capital
E) payroll

Question

Quizplus · Accepted Answer

Variable costs are those costs that are directly proportionate to the level of production. As the production level changes, these costs change as well. Examples of variable costs include raw materials, labor costs, and sales commissions. Fixed costs, on the other hand, do not change with production levels and include expenses such as rent, salaries of permanent employees, and insurance premiums. Target costs refer to a desired cost level set by management, while capital and payroll are not types of costs, but rather categories of expenditures. Therefore, option B is the correct answer.

Costs That Change Directly with the Level of Production Are