Final answer:
Variable costs are costs that vary with production levels, and are zero when production is zero. Increases in variable costs do not necessarily increase operating cash flow, as this depends on the relationship between costs and revenues.
Step-by-step explanation:
The question concerns the nature of variable costs in relation to production and their impact on financial outcomes. Statement a is incorrect because variable costs minus fixed costs do not equal marginal costs; marginal costs refer to the additional cost of producing one more unit of output, which typically changes with the level of output. Statement b is correct; variable costs are indeed equal to zero when production is zero, as these costs are directly associated with the production process. Statement c is generally incorrect, as an increase in variable costs, without an increase in revenues, would actually decrease operating cash flow, not increase it.
Variable costs are costs that change with the level of output, such as costs for labor and raw materials. Fixed costs, on the other hand, are not related to the level of output and must be paid regardless of production levels. Thus, variable costs tend to increase with increased production due to factors like diminishing marginal returns, where each additional unit produced costs more than the previous one.