Which statement best describes variable cost behavior?

Which statement best describes variable cost behavior?

• A. Variable cost per unit changes with output.
• B. Variable cost per unit remains constant regardless of volume; total variable cost changes with volume.
• C. Variable costs are always fixed within the relevant range.
• D. Variable costs are not affected by production levels.

Answer: (B)

Variable costs change in total as activity changes, but the cost per unit stays the same within the relevant range. This means total variable cost rises proportionally with output, while the variable cost per unit remains constant regardless of volume. So the statement that best describes variable cost behavior is that the variable cost per unit remains constant regardless of volume; total variable cost changes with volume. The other ideas mix up what happens: the unit cost doesn’t vary with output under normal assumptions, variable costs aren’t fixed within the relevant range, and they are indeed affected by production levels.

Variable costs change in total as activity changes, but the cost per unit stays the same within the relevant range. This means total variable cost rises proportionally with output, while the variable cost per unit remains constant regardless of volume. So the statement that best describes variable cost behavior is that the variable cost per unit remains constant regardless of volume; total variable cost changes with volume. The other ideas mix up what happens: the unit cost doesn’t vary with output under normal assumptions, variable costs aren’t fixed within the relevant range, and they are indeed affected by production levels.