A cost that changes in proportion to changes in activity or volume is called:

Question

BlackTom AI · Accepted Answer

The question asks to identify which option describes a cost that changes in proportion to changes in activity or volume.
Option 1: Direct costs. These are costs that can be directly traced to a cost object (like a specific product or department). While some direct costs can be variable, direct costs as a category are not defined by their behavior being proportional to activity, so this option does not match the given definition.
Option 2: Variable costs. By definition, variable costs vary in direct proportion to changes in activity or volume. Examples include materials or sales commissions that increase as production or sales rise, and decrease when activity falls. This matches the description in the question.
Option 3: Indirect costs. Indirect costs are not traceable to a single cost object and are allocated across objects (e.g., overhead). Their behavior with respect to activity can be fixed, variable, or mixed, but the term itself does not specify a proportional change with activity, so this is not the best fit for the provided definition.
Option 4: Fixed costs. Fixed costs remain constant regardless of activity or volume within a relevant range, so they do not change proportionally with activity. This is the opposite of what the question describes.
In summary, only the description for variable costs aligns with a cost that changes in proportion to changes in activity or volume, while the other options refer to different cost characteristics or categories.

2601-ACC1064 FUNDAMENTALS OF ACCOUNTING Pop Quiz 1 2601-ACC1064 FUNDAMENTALS OF ACCOUNTING Pop Quiz 1

A cost that changes in proportion to changes in activity or volume is called:

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