Which statement describes variable costs?

Which statement describes variable costs?

• A. Costs that are controllable by management
• B. Costs that remain constant regardless of sales
• C. Costs that increase and decrease in direct proportion to sales volume
• D. Costs that occur only during peak hours

Answer: (C)

Variable costs are costs that change in total with the level of sales or activity. In a foodservice operation, things like ingredients and direct labor tied to production rise as you serve more customers. The key idea is that total variable costs move in direct proportion to sales volume—double the meals, and the total variable costs roughly double, while the cost per unit stays about the same. This distinguishes them from fixed costs, which stay the same regardless of volume, such as rent or salaries that don’t fluctuate with sales. The other statements don’t describe how variable costs behave with volume: controllability is about whether management can influence a cost, not how it changes with sales; fixed costs stay constant; and peak-hour timing isn’t what defines a cost as variable.

Variable costs are costs that change in total with the level of sales or activity. In a foodservice operation, things like ingredients and direct labor tied to production rise as you serve more customers. The key idea is that total variable costs move in direct proportion to sales volume—double the meals, and the total variable costs roughly double, while the cost per unit stays about the same. This distinguishes them from fixed costs, which stay the same regardless of volume, such as rent or salaries that don’t fluctuate with sales. The other statements don’t describe how variable costs behave with volume: controllability is about whether management can influence a cost, not how it changes with sales; fixed costs stay constant; and peak-hour timing isn’t what defines a cost as variable.