Which of the following would be classified as a variable cost?

Question

Freight costs associated with transporting finished goods from the factory to the sales floor

The wages of salaried factory management staff

The factory’s monthly liability insurance payment

The factory’s annual property taxes

Answer 1

The cost that would be classified as a variable cost among the options given is:

Freight costs associated with transporting finished goods from the factory to the sales floor.

Variable costs change in direct proportion to changes in the level of production or sales. Freight costs are incurred based on the amount of goods being transported, so they vary with production levels.

The other options (wages of salaried factory management, monthly liability insurance, and annual property taxes) are considered fixed costs because they do not fluctuate with production levels.