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

Question

Quizplus · Accepted Answer

Variable costs are costs that increase or decrease in proportion to the level of production. This means that if the production level increases, variable costs will also increase, and if the production level decreases, variable costs will also decrease. Examples of variable costs include direct materials, direct labor, and sales commissions. Fixed costs, on the other hand, remain constant regardless of the level of production. Target costs are a specific type of cost management strategy, and total costs and unit costs are broader categories that can include both fixed and variable costs.

Costs That Vary Directly with the Level of Production Are