Which item is described as variable costs?

• A. Variable Costs
• B. Fixed Costs
• C. Total Costs
• D. Breakeven

Answer: (A)

Variable costs are those that change in line with the level of output. As you produce more, you need more materials, more direct labour, and similar costs, so total variable costs rise with volume. The item described as variable costs is the term itself, “Variable Costs,” because it identifies costs that vary with activity.

Fixed costs, by contrast, stay the same regardless of how much you produce. Total costs are the sum of fixed and variable costs, and breakeven is the point where total costs equal total revenue, not a type of cost.