ECONOMICS

Detailed explanation-1: -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 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: -Conversely, a variable cost is dependent on the production output level of goods and services. Unlike a fixed cost, a variable cost is always fluctuating. This cost rises as the production output level rises and decreases as the production output level decreases.

Detailed explanation-4: -Wages paid to the factory labour are costs that are directly proportional to the level of production. If zero output is being produced then these costs do not have to be incurred. These costs vary with the level of output produced. Therefore, they are classified as variable costs.

Detailed explanation-5: -Variable costs change with change in output.