Question

All of the following are considered components of variable costs EXCEPT?

1) Labor
2) Materials
3) Property Taxes
4) Utilities

Answer 1

Variable costs are the costs of the variable inputs, such as labor and raw materials.

Step-by-step explanation:

Variable costs are the costs of the variable inputs (e.g., labor). The only way to increase or decrease output is by increasing or decreasing the variable inputs. Therefore, variable costs increase or decrease with output. We treat labor as a variable cost, since producing a greater quantity of a good or service typically requires more workers or more work hours. Variable costs would also include raw materials.