ECONOMICS

Detailed explanation-1: -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-2: -Variable overhead costs are costs that change as the volume of production changes or the number of services provided changes. Variable overhead costs decrease as production output decreases and increase when production output increases. If there is no production output, then there would be no variable overhead costs.

Detailed explanation-3: -Variable Cost Formula. To calculate variable costs, multiply what it costs to make one unit of your product by the total number of products you’ve created. This formula looks like this: Total Variable Costs = Cost Per Unit x Total Number of Units.

Detailed explanation-4: -Variable cost – A cost that in total increases when the firm increases its output and decreases when the firm reduces its output. Average total cost – A firm’s total cost divided by output (the quantity of product produced); equal to average fixed cost plus average variable cost.