The correct answer is: A. variable
A variable expense is an expense that changes in direct proportion to the level of business activity. For example, the cost of raw materials used to produce a product is a variable expense, because the more products that are produced, the more raw materials will be needed.
A semi-variable expense is an expense that has both fixed and variable components. For example, the cost of electricity for a factory is a semi-variable expense, because the factory will always have some basic level of electricity usage, even if it is not producing any products. However, the cost of electricity will also increase as the factory produces more products.
A fixed expense is an expense that does not change in direct proportion to the level of business activity. For example, the rent for a factory is a fixed expense, because the factory will always have to pay rent, regardless of how many products it produces.
In the case of telephone expense, it is a variable expense because it changes in direct proportion to the level of business activity. For example, if a company makes more phone calls, it will have to pay more for telephone service.
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