ECONOMICS (CBSE/UGC NET)

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 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.

Detailed explanation-3: -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-4: -What is another name for variable cost? Variable cost is sometimes referred to as “unit-level cost” because it varies per unit of output-that is, according to the number of units produced.