Material costs vary proportionally with production volume

Steps:

• Cost per unit is $1000 for one item.
• For 20 units, expected cost is 20 × $1000 =$20,000.
• Actual cost matches exactly at $20,000.
• Cost scales directly with output, indicating variability.

Why D is correct:

• Variable costs change in direct proportion to output volume, as shown by the formula Total Variable Cost = Variable Cost per Unit × Units Produced.

Why the others are wrong:

• A: Fixed costs remain constant regardless of output level.
• B: Semi-variable costs include both fixed and variable elements, not purely proportional here.
• C: Stepped costs stay fixed over output ranges before jumping discretely.

Final answer: D