Primary labor and materials are also known as ______ because they change with production volume.

Primary labor and materials are also known as ______ because they change with production volume.

• A. Overhead costs
• B. Sunk costs
• C. Variable costs
• D. Fixed costs

Answer: (C)

Variable costs are the costs that change in total as production volume changes. Primary labor and materials fall into this category because increasing or decreasing output requires more labor hours and more raw materials, so the total cost moves up or down with production. The per-unit cost of these inputs may stay relatively constant, but the overall amount varies with quantity. This differs from fixed costs, which do not vary with output in the relevant range (like space or salaries not tied to production). Sunk costs are past, unrecoverable expenditures and aren’t useful for current decisions. Overhead can include fixed and variable elements, but variable costs specifically describe inputs whose total amount changes with how much you produce, making it the best description for labor and materials.

Variable costs are the costs that change in total as production volume changes. Primary labor and materials fall into this category because increasing or decreasing output requires more labor hours and more raw materials, so the total cost moves up or down with production. The per-unit cost of these inputs may stay relatively constant, but the overall amount varies with quantity. This differs from fixed costs, which do not vary with output in the relevant range (like space or salaries not tied to production). Sunk costs are past, unrecoverable expenditures and aren’t useful for current decisions. Overhead can include fixed and variable elements, but variable costs specifically describe inputs whose total amount changes with how much you produce, making it the best description for labor and materials.