A company incurs a cost that is directly proportional to the magnitude of the decision variable.This is an example of a:
A)fixed charge
B)sunk cost
C)variable cost
D)marginal cost
E)inventory cost

Question

Quizplus · Accepted Answer

A cost that is directly proportional to the magnitude of the decision variable is a variable cost. Variable costs vary with the level of output or activity, as opposed to fixed costs which remain constant. Sunk costs are costs that have already been incurred and cannot be recovered, while marginal costs are the cost of producing one additional unit of output. Inventory costs are the costs associated with holding and storing inventory. Therefore, the best choice is C, variable cost.

A Company Incurs a Cost That Is Directly Proportional to the Magnitude