Question

LO 2.2Variable costs are expenses that ________.

remain constant on a per-unit basis but change in total based on activity level
remain constant on a per-unit basis and remain constant in total regardless of activity level
decrease on a per-unit basis as activity level increases
remain constant in total regardless of activity level within a relevant range

Answer 1

Answer: A: remain constant on a per-unit basis but change in total based on activity level

Explanation: A Variable cost is a cost an organisation incurs that is affected by fluctuations in production and so changes between given periods.

variable costs are not consistent but fluctuates in relation to the production activity of an organisation. Variable costs increases as production level increases and vise versa.

Costs associated with variable costs are those that contribute directly to the goods or service being offered by a business and therefore differ from period to period.

The total costs a company incurs are divided into Variable costs and Fixed costs. variable costs are costs incurred on raw materials, commission, labour, packaging and shipping while fixed costs are costs incurred on rent, salaries, repairs and maintenance, electricity etc.