Question

Which of the following is true regarding Variable Cost?

1. Variable costs are fixed in total but vary per unit.
2. Variable Costs vary in proportion to changes in the volume of output.
3. Variable Costs are time-based.
4. Variable Costs are activity-based.

Options

• I & II

• II & III

• II & IV

• I & III

Answer 1

II & IV

Explanation:

Variable costs change in direct proportion to output volume and are activity‑based. They are generally fixed per unit but vary in total as production increases or decreases (e.g., direct materials, direct labour).