Which of the following defines variable costs?

Variable costs are defined as costs that change in total with the level of activity but remain constant per unit. This means that as production or activity levels increase or decrease, the total variable costs will increase or decrease correspondingly. For example, if a company produces more units, the variable costs—like materials and direct labor—will increase because more resources are being used. However, the cost for each individual unit produced remains the same, leading to predictable per-unit costs unless there are changes in pricing or efficiencies.

This understanding is crucial in management accounting, as it affects decision-making and budgeting. Managers need to account for how these costs behave with changes in production levels, allowing for better financial planning and control.

The other options do not correctly describe variable costs. Fixed costs, for instance, remain constant in total regardless of activity level and therefore do not align with the definition of variable costs. Costs associated with seasonality refer to fixed costs that may vary due to seasonal demand but do not change based on production levels in the way variable costs do. Lastly, describing costs only associated with goods sold ignores the broader context of variable costs that can apply to various operational areas beyond just goods sold.