Variable costs are costs that:

Question

BlackTom AI · Accepted Answer

When examining variable costs, I start by recalling the standard definitions. 
Option a says: 'vary in total directly and proportionately with changes in the activity level.' This is correct because the total variable cost increases as activity increases and decreases as activity falls, in direct relation to the level of activity. 
Option b states: 'remain the same per unit at every activity level.' This is also correct because the variable cost per unit stays constant regardless of how much activity occurs; it's the total cost that changes with volume. 
Option c asserts: 'Neither of the above.' Since both (a) and (b) are accurate descriptions, this option is incorrect. 
Option d combines (a) and (b), saying 'Both (a) and (b) above.' Given that each of the two preceding statements is true, this option is also correct. 
Therefore, the correct choice reflects that variable costs have a total that varies with activity and a per-unit cost that remains constant across activity levels, making both (a) and (b) true and (d) the appropriate overall answer.

254_AC360 360 Mock exam for the final exam

Variable costs are costs that:

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