variable cost investment & finance definition
cost that changes based on the level of sales or production. Examples of a
variable cost are temporary labor and materials that are used to produce goods.
Variable costs contrast with fixed costs, which don’t vary with production or
sales levels. For example, a manufacturing plant has fixed costs of rent,
depreciation, and insurance. These expenses will continue to be incurred even
if the plant closes for a two-week holiday.
See variable cost in Wall Street Words
The costs of production that vary directly in proportion to the number of units produced. Variable costs often include labor expenses and raw material costs, because labor and raw material usually must be increased to increase output. Firms for which variable costs represent a high proportion of total costs are usually less likely to experience large fluctuations in earnings, because changes in sales and revenues are accompanied by nearly equal changes in costs. Compare fixed cost
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