Question

Which of the following costs change in total in direct proportion to a change in volume?

A) fixed costs
B) variable costs
C) mixed costs
D) period costs

Answer 1

B) Variable costs change in direct proportion to production volume, increasing as production rises and decreasing as production falls.

Step-by-step explanation:

The costs that change in total in direct proportion to a change in volume are variable costs. In economic terms, variable costs are expenses that vary directly with the level of production. These costs include things such as labor, raw materials, and other inputs that can be adjusted in the short-run. For instance, if a factory increases its output, the cost of materials and labor hours will also increase.

Conversely, if production is decreased, these variable costs will decrease accordingly.