Which cost category changes in total with the level of production?

• A. Fixed costs
• B. Variable costs
• C. Sunk costs
• D. Overhead

Answer: (B)

Variable costs are the costs that change in total as you produce more or fewer units. They vary with the level of production because each additional unit requires more inputs like materials or direct labor. If the cost per unit of these inputs stays the same, total variable cost rises in direct proportion to output. In contrast, fixed costs stay the same in total across a relevant range of production, so making more or less doesn't change their overall amount (though the per-unit cost falls as volume increases). Sunk costs are costs already incurred and cannot be recovered, so they do not flex with current production. Overhead is a broad category that can include both fixed and variable components; by itself it doesn't indicate a change in total with production level. Thus, the category that changes in total with production level is variable costs.