Scribd Logo
Upload

Welcome to Scribd!

  • 67 views

    What Is A Variable Cost?

    Uploaded by

    Marie Miralles
    Variable costs are expenses that change depending on production output levels. They increase as production increases and decrease as production decreases. Examples of variable costs include raw materials, direct labor, sales commissions, and utility costs. In contrast, fixed costs remain the same regardless of production output levels and include expenses like rent, salaries, insurance, and office supplies. Semi-variable costs contain both fixed and variable components.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd

    What Is A Variable Cost?

    Uploaded by

    Marie Miralles
    67 views2 pages
    Variable costs are expenses that change depending on production output levels. They increase as production increases and decrease as production decreases. Examples of variable costs include raw materials, direct labor, sales commissions, and utility costs. In contrast, fixed costs remain the same regardless of production output levels and include expenses like rent, salaries, insurance, and office supplies. Semi-variable costs contain both fixed and variable components.

    Original Title

    Variable Cost

    Copyright

    © © All Rights Reserved

    Available Formats

    DOCX, PDF, TXT or read online from Scribd

    Did you find this document useful?

    Is this content inappropriate?

    Variable costs are expenses that change depending on production output levels. They increase as production increases and decrease as production decreases. Examples of variable costs include raw materials, direct labor, sales commissions, and utility costs. In contrast, fixed costs remain the same regardless of production output levels and include expenses like rent, salaries, insurance, and office supplies. Semi-variable costs contain both fixed and variable components.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    67 views2 pages

    What Is A Variable Cost?

    Uploaded by

    Marie Miralles
    Variable costs are expenses that change depending on production output levels. They increase as production increases and decrease as production decreases. Examples of variable costs include raw materials, direct labor, sales commissions, and utility costs. In contrast, fixed costs remain the same regardless of production output levels and include expenses like rent, salaries, insurance, and office supplies. Semi-variable costs contain both fixed and variable components.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    of 2

    Variable Cost

    By WILL KENTON
     Reviewed By JANET BERRY-JOHNSON 
     Updated Aug 12, 2020
    What Is a Variable Cost?
    A variable cost is a corporate expense that changes in proportion to production
    output. Variable costs increase or decrease depending on a company's
    production volume; they rise as production increases and fall as production
    decreases. Examples of variable costs include the costs of raw materials and
    packaging. A variable cost can be contrasted with a fixed cost.

    KEY TAKEAWAYS

     A variable cost is a corporate expense that changes in proportion with


    production output.
     When production increases, variable costs increase; when production
    decreases, variable costs decrease.
     A variable cost stands in contrast to fixed costs, which do not change no
    matter the change in production levels.
    Volume 75%
     
    1:39

    Variable Costs

    Understanding a Variable Cost


    The total expenses incurred by any business consist of fixed costs and variable
    costs. Variable costs are dependent on production output. The variable cost of
    production is a constant amount per unit produced. As the volume of production
    and output increases, variable costs will also increase. Conversely, when fewer
    products are produced, the variable costs associated with production will
    consequently decrease.

    Examples of variable costs are sales commissions, direct labor costs, cost of raw
    materials used in production, and utility costs. The total variable cost is simply
    the quantity of output multiplied by the variable cost per unit of output. Variable
    costs are usually viewed as short-term costs as they can be adjusted quickly.

    Variable Costs vs. Fixed Costs


    Fixed costs are expenses that remain the same regardless of production output.
    Whether a firm makes sales or not, it must pay its fixed costs, as these costs are
    independent of output.

    Examples of fixed costs are rent, employee salaries, insurance, and office


    supplies. A company must still pay its rent for the space it occupies to run its
    business operations irrespective of the volume of products manufactured and
    sold. If a business increased production or decreased production, rent will stay
    exactly the same. Although fixed costs can change over a period of time, the
    change will not be related to production, and as such, fixed costs are viewed as
    long-term costs.

    There is also a category of costs that falls between fixed and variable costs,
    known as semi-variable costs (also known as semi-fixed costs or mixed costs).
    These are costs composed of a mixture of both fixed and variable components.
    Costs are fixed for a set level of production or consumption and become variable
    after this production level is exceeded. If no production occurs, a fixed cost is
    often still incurred.

    Example of a Variable Cost


    Let’s assume that it costs a bakery $15 to make a cake—$5 for raw materials
    such as sugar, milk, and flour, and $10 for the direct labor involved in making one
    cake. The table below shows how the variable costs change as the number of
    cakes baked vary.

    You might also like