variable costs


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Related to variable costs: direct costs, Semi Variable Costs

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 costs

any COSTS that tend to vary directly with the level of output. They represent payments made for the use of variable factor-inputs, notably raw materials and direct labour.

A firm will leave a market if in the short run it cannot earn sufficient SALES REVENUE to cover its total variable cost. If it can generate enough total revenue to cover total variable cost and make some CONTRIBUTION towards total FIXED COST then it will continue to produce in the short run even though it is still making a loss.

Variable costsclick for a larger image
Fig. 195 Variable costs.

variable costs

any COSTS that tend to vary directly with the level of output. They represent payments made for the use of VARIABLE FACTOR INPUTS (raw materials, labour, etc.).

The SHORT-RUN total variable cost curve (TC) in Fig. 195 (a) has an S shape because at low levels of output total variable costs rise slowly (because of the influence of increasing RETURNS TO THE VARIABLE FACTOR INPUTS), while at high levels of output total variable costs rise more rapidly (because of the influence of DIMINISHING RETURNS to the variable input). Average variable costs (AVC in Fig%. 195) fall at first (reflecting increasing returns to the variable input), but then rise (reflecting diminishing returns to the variable input).

In the THEORY OF MARKETS, a firm will leave a market if in the short run it cannot earn sufficient TOTAL REVENUE to cover its total variable cost. If it can generate enough total revenue to cover total variable cost and make some CONTRIBUTION towards total FIXED COST, then it will continue to produce in the short run even though it is still making a loss. See also MARKET EXIT, LOSS MINIMIZATION.

References in periodicals archive ?
Although the estimates of rail variable costs derived in this study are estimates of actual costs, the values derived for rail revenues and prices are not estimates of actual revenues or prices.
9 Note: [delta]f is the change in fixed costs, [delta]v the change in variable costs, [delta]p the change in the ratio of fixed to variable costs, [delta]N the change in employment.
This represents an annual variable cost savings of $1.
The determination was that Bremer didn't take into account the overhead costs on a fixed and variable cost basis over the whole plant as well as by department.
The variable costs for rehabilitation activity average $700 per patient per month.
The variable cost was estimated at about $62 900 per year, about 88% of which was the cost of labor.
It's a good idea to include a portion of all variable costs with each new or lost test (i.
First, based on program-specific data on the rates, the variable costs, and the program mix, we can compute the package (aggregate) value as follows:
Fixed costs are constant at different enrollment levels while tuition revenue and variable costs increase or decrease in proportion to the change in enrollment.
Total Fixed Costs/Selling Price Per Unit - Variable Cost Per Unit
Depending on the quantity manufactured, both variable cost per unit and overall fixed costs may change.
A principle of saving involves treating an otherwise variable cost as though it were fixed.