ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -Electricity is a good example of a semi-variable cost. The base rate for service may be constant, but as production grows, power consumption and the company’s electricity bills go up. In other words, there is both a fixed and variable aspect to semi-variable costs.

Detailed explanation-2: -However, the cost of electricity is a variable cost since electricity usage increases with the number of products that are produced or manufactured. In short, if the total cost associated with the cost object changes when the production amount changes, it’s likely a variable cost.

Detailed explanation-3: -Fixed expenses generally cost the same amount each month (such as rent, mortgage payments, or car payments), while variable expenses change from month to month (dining out, medical expenses, groceries, or anything you buy from a store).

Detailed explanation-4: -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-5: -Variable Expenses Definition. Variable expenses are the opposite of fixed expenses. A variable expense may recur from month to month. But the amount you pay in any given month could be different from previous payments or ones you’ll make in the future.