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A variable cost is one that changes in proportion to

  • A.the selling price of the product
  • B.the volume of output
  • C.the time elapsed
  • D.the firm's total fixed cost

Answer: B

Correct answer: the volume of output

A variable cost is incurred per unit made, so it rises and falls with the quantity produced - materials, piece-rate labour, power consumed by the process. A fixed cost is incurred per period regardless of output, and it is the separation of the two that makes break-even analysis possible at all.

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