An example of a variable cost is:

An example of a variable cost is:

• A. monthly rent
• B. overhead salaries
• C. cost of goods sold
• D. the salary of the Finance Vice President

Answer: (C)

Variable costs are expenses that change in direct proportion to the level of production or sales activity. The cost of goods sold is a prime example of a variable cost because it fluctuates based on the quantity of products manufactured or sold. When a business sells more products, the cost of producing those goods increases due to the materials, labor, and other resources involved in the creation process. In contrast, monthly rent is a fixed cost that remains constant regardless of the level of production. Overhead salaries and the salary of the Finance Vice President are also fixed costs, as they do not vary with production levels. This makes the cost of goods sold the only option that exemplifies a variable cost, as it directly correlates with the sales volume and production activities of the business.

Variable costs are expenses that change in direct proportion to the level of production or sales activity. The cost of goods sold is a prime example of a variable cost because it fluctuates based on the quantity of products manufactured or sold. When a business sells more products, the cost of producing those goods increases due to the materials, labor, and other resources involved in the creation process.

In contrast, monthly rent is a fixed cost that remains constant regardless of the level of production. Overhead salaries and the salary of the Finance Vice President are also fixed costs, as they do not vary with production levels. This makes the cost of goods sold the only option that exemplifies a variable cost, as it directly correlates with the sales volume and production activities of the business.