In a business context, a variable cost is an expense that varies depending on production or sales levels. Unlike fixed costs, which remain the same regardless of output, variable costs may change based on business activity. Variable costs are also pivotal in determining a business's gross profit...
In this guide, you’ll learn the definition of variable cost, how to calculate variable cost, and how variable costs can impact the profitability of your business. What is variable cost? Variable cost is a business expense that rises or falls in direct proportion to production volume. The mor...
The implication of high variable costs for a company is more room for fluctuation in production output while still maintaining profitability. Conversely, companies with high variable costs will yield lower marginal profits than those with high fixed costs. Variable cost is paired with its opposite, ...
This shows the role that costs play in business decision-making. In this case, the best decision would be for Jean to continue in business while looking for ways to reduce the variable expenses. Variable Cost Examples The formula for the variable cost is simple because all of the organization...
A variable cost is a constant amount per unit produced or used. Therefore, the total amount of the variable cost will change proportionately with the change in volume or activity. Examples of Variable Costs Generally, a product’s direct materials are a variable cost. For example, if a bake...
So, what types ofcostsqualify as variable? Anything directly related to variations in your business’s production activity falls under this definition. Here are a few variable cost examples: Raw materials: This is one of the first variable costs to be aware of, also called direct materials cost...
What is a variable cost? A variable cost is a cost that varies directly with changes in the level of production or sales volume. In other words, it’s a cost that changes in proportion to the level of activity in a business. Some examples of variable costs include direct labor costs, ...
Which cost is an example of a variable cost? The cost of raw materials is a core example of variable costs. If your business makes cakes, for example, you’ll need raw materials such as eggs, butter and flour. As those prices fluctuate, so will your business expenses. Can variable ...
Understanding Variable Costs The total expenses incurred by any business consist of variable and fixed costs. Variable costs are dependent on production output or sales. The variable cost of production is a constant amount per unit produced. As the volume of production and output increases, variable...
In the long run, A. the variable cost of production minus the total cost of production is the fixed cost ofproduction. B. the total cost of production minus the variable cost of production is the fixed cost ofproduction. C. the total cost of production minus the variable cost of ...