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Which is the correct example of a variable cost?

Answer and explanation

Correct answer: Raw material used for each product

A variable cost changes with the level of production or sales. If an enterprise makes more units, it normally needs more raw material, so total material cost rises; if production falls, the total falls. Rent, an annual licence fee, and the purchase of equipment are generally fixed or periodic capital costs rather than costs that vary directly with each unit.

Related tags

Variable CostCost ManagementFinanceConceptNature And Importance Of Business FinanceConcept Nature And Importance Of Business FinanceSources Of Business FinanceBusiness StudiesClass 11 Mcq

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