ECONOMICS

Detailed explanation-1: -A variable cost is an expense that changes in proportion to production output or sales. When production or sales increase, variable costs increase; when production or sales decrease, variable costs decrease.

Detailed explanation-2: -Variable costs change in proportion to the quantity of output. As production quantity increases, the cost increases; as production quantity decreases, so do the costs. Most accounting textbooks depict variable costs as varying directly with volume.

Detailed explanation-3: -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-4: -Variable costs are sometimes called unit-level costs as they vary with the number of units produced.

Detailed explanation-5: -Variable costs typically show diminishing marginal returns, so the marginal cost of producing higher levels of output rises. Total cost is the sum of fixed and variable costs of production.