Question

Which of the following always has a direct cause-effect relationship to a cost?

a) Revenue
b) Overhead expenses
c) Variable expenses
d) Fixed expenses

Answer 1

Variable expenses always have a direct cause-effect relationship to a cost as they vary based on the level of production or output.

Step-by-step explanation:

The direct cause-effect relationship to a cost can be found in variable expenses. Variable expenses are costs that vary based on the level of production or output. Examples of variable expenses include raw materials and labor. When the level of production or output increases, variable expenses also increase, and vice versa.