VARIABLE COST Meaning and
Definition
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Variable cost refers to a type of expense that fluctuates in direct proportion to the level of production or sales volume of a business. It is an expenditure that varies depending on the quantity of goods or services produced by a company. In other words, the cost changes as the activity levels change in a business.
Variable costs are distinguished from fixed costs, which remain constant irrespective of the production or sales volume. While fixed costs include expenses like rent, salaries, and insurance that do not alter with changes in production, variable costs are directly related to the goods or services being produced.
Examples of variable costs could include raw materials or components needed for production, direct labor costs, packaging materials, and sales commissions. As production increases, variable costs rise as more materials and labor are required to meet the higher demand. Conversely, if production decreases, variable costs will decrease as fewer resources are needed.
Variable costs are essential for businesses to determine their cost structure and make pricing decisions. By understanding the variable costs associated with producing a unit of a product or providing a service, companies can calculate their breakeven point, determine profit margins, and assess the impact of changes in production levels on their overall profitability.
Common Misspellings for VARIABLE COST
- cariable cost
- bariable cost
- gariable cost
- fariable cost
- vzriable cost
- vsriable cost
- vwriable cost
- vqriable cost
- vaeiable cost
- vadiable cost
- vafiable cost
- vatiable cost
- va5iable cost
- va4iable cost
- varuable cost
- varjable cost
- varkable cost
- varoable cost
- var9able cost
- var8able cost
Etymology of VARIABLE COST
The word "variable" comes from the Latin word "variabilis", which is derived from the verb "variare" meaning "to vary" or "to change". The word "cost" comes from the Latin word "costus", which is derived from the Latin verb "constāre" meaning "to stand together" or "to be fixed". Therefore, "variable cost" combines these elements, with "variable" implying the aspect of change or variation, and "cost" referring to the expenses or expenditure associated with a particular activity or production.
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