Which term refers to the expenses that fluctuate with production volume?

The term that refers to the expenses that fluctuate with production volume is variable costs. These costs are directly associated with the level of production; as production increases, variable costs rise, and as production decreases, these costs fall. Examples of variable costs include raw materials, labor costs directly tied to production, and utility expenses that vary with the amount of production.

In contrast, fixed costs remain constant regardless of the level of production, such as rent or salaries for permanent staff. Overhead costs refer to the ongoing expenses necessary to run a business that aren't directly tied to producing a product or service, and these can include both fixed and variable components. Direct costs are expenses that can be directly attributed to the production of specific goods or services, such as raw materials and labor, but they do not inherently fluctuate with production in the same way that variable costs do. Hence, the identification of variable costs as fluctuating expenses reflects a fundamental concept in cost accounting and micro enterprise management.