Which expense is a variable cost?

Which expense is a variable cost?

• A. Hourly wages for an office employee
• B. Monthly rent on a store
• C. Insurance payments
• D. Purchase of a new copy machine

Answer: (A)

Variable costs change with the level of business activity. Hourly wages for an office employee fit this because the total payroll rises or falls with how many hours are worked; more workload means more hours and higher wages, while less workload means fewer hours and lower wages. In contrast, monthly rent stays the same regardless of activity, insurance premiums are typically fixed, and buying a new copy machine is a one-time capital expense rather than a cost that varies with activity.

Variable costs change with the level of business activity. Hourly wages for an office employee fit this because the total payroll rises or falls with how many hours are worked; more workload means more hours and higher wages, while less workload means fewer hours and lower wages. In contrast, monthly rent stays the same regardless of activity, insurance premiums are typically fixed, and buying a new copy machine is a one-time capital expense rather than a cost that varies with activity.