Humber/Ontario Real Estate Course 2 Exam Practice

Which of the following types of costs refers to those that vary with the level of output?

1. Fixed costs

2. Incremental costs

3. Marginal costs

4. Variable costs

The correct answer is: Variable costs

Variable costs refer to costs that vary with the level of output. As production or sales increase, variable costs also increase proportionally. These costs can include things like raw materials, direct labor, and utilities directly related to production. On the other hand, fixed costs (option A) remain constant regardless of the level of output, incremental costs (option B) are the additional costs incurred by producing one more unit, and marginal costs (option C) represent the additional cost of producing one more unit.