Economists correctly point out that many costs that the accountant classifies as variable are actually curvilinear.

Question

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Economists argue that some costs that are classified as variable costs (such as labor costs) do not increase or decrease uniformly with changes in output, but may instead reflect curvilinear relationships. For example, at low levels of production, additional workers may be able to increase output significantly, but at higher levels of production, adding more workers may lead to diminishing returns and increasing costs. This means that the cost per unit may not remain constant as output varies, and therefore may not be truly variable in the traditional accounting sense.

Economists Correctly Point Out That Many Costs That the Accountant