variable cost

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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.

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.

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.
References in periodicals archive ?
Average Share of Variable Expense for All Nonlocal and Local Food Producers, United States.
Once variable expenses are determined, you can plug that number into the following formula to determine if you should fly fast:
Note that capital outlay for that particular course offering becomes a variable expense. If that course were not offered, we would not be expending those funds.
Accordingly, the adoption of strategies that enable the organization to transform fixed costs into variable expenses by adjusting resource consumption in response to variation in volume may increase profitability, improve the net cash flow derived from operations and reduce the fiscal risks that are attributable to operating leverage.
Similarly, for a given face amount, a particular universal life insurance policy may be competitive at high premium levels but noncompetitive at lower premium levels, possibly due to fixed versus variable expense and surrender charges.
At this level of activity, budgetted expenses are $ 1000 fixed expense and $ 1000 variable expense for the month.
* Convert fixed expense into variable expense. In addressing the state's employee retirement program, AOI suggests public employers, like their counterparts in the private sector, switch from defined benefit plans to defined contribution plans.
Month to month, the department manager must concentrate solely on the variable expense budget and not concern himself with the fixed expenses.
Office $17,250 12% Professional (Acct, Legal, Tax) $10,400 0.7% Operating Profit $223,110 15.7% (a) Light Blue = Percentage of revenue should be used (because it's a variable expense) (b) Gray = Absolute dollars should be used (because it's a fixed expense)
PRATER COMPANY Monthly Selling Expense Budget Sales volume $500,000 $600,000 $700,000 Variable expense: Sales commissions $ 20,000 $ 24,000 $ 28,000 Shipping expense 5,000 6,000 7,000 Miscellaneous selling expense 3,750 4,500 5,250 Total variable expense $ 28,750 $ 34,500 $ 40,250 Fixed expense: Sales manager's salary $ 80,000 $ 80,000 $ 80,000 Advertising expense 75,000 75,000 75,000 Miscellaneous selling expense 2,000 2,000 2,000 Total fixed expense $157,000 $157,000 $157,000 Total selling expense $185,750 $191,500 $197,250 Answers to Multiple Choice 1.
A $.15 reduction in the variable expense of a towel plus a five-minute reduction in service time plus a $1 hike in the fee increases the contribution margin per hour of a wet cut from $13.09 to $16.45 ($10.97/.667).
The immediate attention of the company is on headcount reductions, slowing the pace of investments in its IP portfolio and driving out all excess variable expense items.

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