Question

Within the relevant range, variable costs can be expected to:

Multiple Choice
increase on a per unit basis as the activity level increases.
remain constant in total as the activity level changes.
increase on a per unit basis as the activity level decreases.
vary in total in direct proportion to changes in the activity level

Answer 1

Variable costs increase or decrease with output and are influenced by the quantity of labor and raw materials used.

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.