Which of the following is a variable cost?
A)Raw materials
B)Rent
C)Insurance expense
D)Salaries

Question

Quizplus · Accepted Answer

Raw materials are a variable cost because they directly vary with the level of production. The more products a company manufactures, the more raw materials it will need to purchase. Therefore, the cost of raw materials is considered a variable cost.

D) Salaries can also be a variable cost if they are tied to the level of production or sales. For example, if a company pays its sales team a commission based on the sales they generate, then the salary expense is directly tied to the level of sales and can be considered a variable cost. However, if the salaries are fixed and not tied to production or sales, then they would be considered a fixed cost.

B) Rent and C) Insurance expense are both examples of fixed costs. Fixed costs do not vary with the level of production or sales and are constant over a period of time. Rent is a fixed cost because it is a set expense that a company must pay regardless of how much it produces or sells. Similarly, insurance expense is a fixed cost because it is a set cost that a company must pay for a specific period of time, regardless of the level of production or sales.

Which of the Following Is a Variable Cost