Variable costs are sometimes called common costs, which are incurred for more than one function or segment and thus must be allocated on some reasonable basis. For example, the sales manager's salary or office utilities would have to be spread among sales functions, sales territories, and other segments and, hence, are known as variable costs.

Question

Quizplus · Accepted Answer

Variable costs change with the level of production or sales volume, while common costs are fixed costs that are shared across multiple functions or segments. The sales manager's salary and office utilities are examples of fixed costs, not variable costs.

Variable Costs Are Sometimes Called Common Costs, Which Are Incurred