Costs that go up or down depending on the quantity produced are called?

• A. Fixed costs
• B. Variable costs
• C. Opportunity costs
• D. Marginal costs

Answer: (B)

Variable costs change with production volume. The amount spent on materials, direct labor, and utilities typically rises as you manufacture more units and falls when you produce less, because these costs are tied directly to the quantity of output. In contrast, fixed costs stay the same regardless of how much you make, opportunity costs are the foregone benefits of the alternative you could have chosen, and marginal cost is the extra cost of producing one more unit (an incremental view tied to a specific change in output). So, when costs vary with how much you produce, they’re variable costs.