ECONOMICS

Detailed explanation-1: -What Are Some Examples of Variable Costs? Common examples of variable costs include costs of goods sold (COGS), raw materials and inputs to production, packaging, wages, and commissions, and certain utilities (for example, electricity or gas that increases with production capacity).

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.

Detailed explanation-3: -Raw materials are categorized as direct expenses on a company’s income statement because they contribute directly to the making of a product or delivery of a service. As raw material costs change along with production volumes, they are considered to be variable costs.

Detailed explanation-4: -Wages paid to workers for their regular hours are a fixed cost. Any extra time they spend on the job is a variable cost.

Detailed explanation-5: -For example, the packaging costs associated with a product would be a variable cost since the packaging costs would increase as sales increased. The raw materials used to make the product would also be variable costs since the cost of materials would rise and fall depending on sales volume of the product.