ECONOMICS

Detailed explanation-1: -What Is a Variable Cost? A variable cost is a corporate expense that changes in proportion to how much a company produces or sells. Variable costs increase or decrease depending on a company’s production or sales volume-they rise as production increases and fall as production decreases.

Detailed explanation-2: -Variable costs are costs that change as the volume changes. Examples of variable costs are raw materials, piece-rate labor, production supplies, commissions, delivery costs, packaging supplies, and credit card fees. In some accounting statements, the Variable costs of production are called the “Cost of Goods Sold.”

Detailed explanation-3: -Both product costs and period costs directly affect your balance sheet and income statement, but they are handled in different ways. Product costs are always considered variable costs, as they rise and fall according to production levels.

Detailed explanation-4: -Variable costs are expenses that go up and down in line with business activity. The busier you are, the higher they go. They’re the opposite of fixed costs. Many variable costs, such as inventory and freight, go up in line with the number of sales a business is making.