{"id":6572,"date":"2021-10-05T11:52:46","date_gmt":"2021-10-05T06:22:46","guid":{"rendered":"https:\/\/www.goseeko.com\/blog\/?p=5771"},"modified":"2021-10-30T07:39:46","modified_gmt":"2021-10-30T07:39:46","slug":"__trashed-2","status":"publish","type":"post","link":"https:\/\/www.goseeko.com\/blog\/__trashed-2\/","title":{"rendered":"What is Variable Cost?"},"content":{"rendered":"\n

Variable Cost<\/a> is an expense that vary in proportion to the volume of goods or services that a company produces. That is, they are costs that vary depending on the volume of activity. Costs increase as the volume of activities increases and decrease as the volume of activities decreases.<\/p>\n\n\n\n

Types :<\/h2>\n\n\n\n

 The most common variable costs are:<\/strong><\/p>\n\n\n\n

a.<\/strong>       Direct material<\/strong> <\/h2>\n\n\n\n

Direct materials are inventories of raw materials purchased by manufacturers or retailers to create finished products or goods. Therefore, the direct material cost is the cost of all the items used to manufacture the product.<\/p>\n\n\n\n

b.<\/strong>      Direct labor<\/strong> Variable Cost<\/h2>\n\n\n\n

This amounts to paid per unit that the worker completes or sells. Employee input usually determines the cost of piece work. This cost also increases or decreases with the production rate.<\/p>\n\n\n\n

c.<\/strong>       Packaging material<\/strong><\/h2>\n\n\n\n

The materials used to pack products may be considered variable costs as they may be used in different quantities depending on the volume sold or produced. Some companies choose to reduce the number of packaging materials used in their products when production or sales decrease.<\/p>\n\n\n\n

d.<\/strong>      Piece work<\/strong><\/h2>\n\n\n\n

This is the amount paid per unit that the worker completes or sells. Employee input usually determines the cost of piece work. This cost also increases or decreases with the production rate.<\/p>\n\n\n\n

e.<\/strong>      Freight transport<\/strong><\/h2>\n\n\n\n

The company bears the shipping costs when selling and distributing the product. Therefore, freight transportation considers a variable cost. Shipping costs are the costs companies incur when transporting raw materials from one location to another or delivering finished products.<\/p>\n\n\n\n

f.<\/strong>        Production supplies<\/strong><\/h2>\n\n\n\n

Production supplies are indirect raw materials needed during the manufacturing or assembly process. For instance, machine oil, which is difficult to measure from the amount and frequency of use of the machine<\/p>\n\n\n\n

g.<\/strong>       Billable wages<\/strong><\/h2>\n\n\n\n

This refers to the amount paid to employees who work every hour. This is in contrast to the fixed salary, regardless of the employee’s working hours.<\/p>\n\n\n\n

h.<\/strong>      Credit card transaction fee<\/strong><\/h2>\n\n\n\n

These fees charges to companies that accept credit cards as a payment method from their customers. In this case, the variable cost is not a fixed monthly fee, but an unpredictable monthly transaction fee.<\/p>\n\n\n\n

Basically, if the cost fluctuates depending on the amount of activity, it will be a variable cost.<\/p>\n\n\n\n

Variable Cost calculation formula<\/strong><\/h2>\n\n\n\n

Total variable cost = total production volume x variable cost per production unit<\/p>\n\n\n\n

<\/p>\n\n\n\n

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What is economics?<\/a><\/blockquote>