Variable Cost

Variable cost

A cost that is directly proportional to the volume of output produced. When production is zero, the variable cost is equal to zero.

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variable cost

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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Variable Cost

A cost to a person or business that varies over time according to a number of factors. For example, a dental office must buy dental supplies, which usually cost about the same. This is a fixed cost. On the other hand, the dental office must also pay the electric and gas and water bills, which may fluctuate considerably. This is a variable cost.

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Variable Cost

What Does Variable Cost Mean?

A cost that changes in proportion to a change in a company's activity or business.

Investopedia explains Variable Cost

A good example of a variable cost is fuel for an airline. This cost changes with the number of flights and how long the trips are.

Related Terms:
• Accrual Accounting
• Contribution Margin
• Law of Diminishing Marginal Utility
• Operating Leverage
• Operating Margin