Variable costs are expenses that must be paid regardless of whether sales are being generated.

Question

BlackTom AI · Accepted Answer

The statement presented asks us to classify variable costs as either true or false in relation to whether they must be paid regardless of sales activity.
Option 1: True. This is inaccurate because variable costs are defined as costs that fluctuate with the level of production or sales. They increase when output rises and decrease when output falls. Therefore, they are not fixed expenses that are paid regardless of sales.
Option 2: False. This correctly identifies the nature of variable costs. Since they vary with activity level, they are not incurred in the same amount when sales are zero or low, making them avoidable to some extent depending on production decisions. In contrast, fixed costs would be the expenses that must be paid irrespective of sales volume, such as rent or salaries for non-production staff.
In summary, the core misconception in Option 1 is treating variable costs as fixed obligations. The accurate understanding is that variable costs depend on activity level, while fixed costs remain constant regardless of sales. Therefore, the statement is false.

GBUS4330W01 25 Fall GBUS 4330 Quiz 2 - Requires Respondus LockDown Browser

Variable costs are expenses that must be paid regardless of whether sales are being generated.

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Similar Questions

Variable costs are defined as costs that

An example of variable costs might be:

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

_____ costs vary with quantity of goods sold but remain constant on a per‑unit basis.

A variable cost will stay constant on a per unit basis as the volume increases.

Costs that change in respect to changes in the level of activity are referred to as:

How will total variable cost be affected if production increases by 20%?

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GBUS*4330*W01 25 Fall GBUS 4330 Quiz 2 - Requires Respondus LockDown Browser

Variable costs are expenses that must be paid regardless of whether sales are being generated.

View Explanation

Log in for full answers

Similar Questions

Variable costs are defined as costs that

An example of variable costs might be:

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

_____ costs vary with quantity of goods sold but remain constant on a per‑unit basis.

A variable cost will stay constant on a per unit basis as the volume increases.

Costs that change in respect to changes in the level of activity are referred to as:

How will total variable cost be affected if production increases by 20%?

More Practical Tools for Students Powered by AI Study Helper

Making Your Study Simpler

GBUS4330W01 25 Fall GBUS 4330 Quiz 2 - Requires Respondus LockDown Browser