Variable cost: Is output-dependent and subject to fluctuations

Variable Cost is output-dependent and subject to fluctuations based on the production output, or volume, in the current period. Variable costs represent a critical component of financial analysis and business decision making. By understanding how to calculate and analyse variable costs, companies can properly budget, price products and services competitively, and comprehend their cost structure. What is a Variable Cost? A variable cost is any corporate expense that changes along with changes in production volume. As production increases, these costs rise and as production decreases, they fall. Common examples include raw materials, direct labor, and packaging. Learn what a variable cost is, how to calculate it, and why it matters for your business. Find out the types of variable costs, the difference between variable and fixed costs, and how to use variable cost analysis.