Variable Cost

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Description

A variable cost varies, in total, in direct proportion to changes in the level of activity. Common examples of variable costs include cost of goods sold for a merchandising company, direct materials, direct labor, variable elements of manufacturing overhead, such as indirect materials, supplies, and power, and variable elements of selling and administrative expenses, such as commissions and shipping costs.

These costs vary directly with the level of production.

Concept Prerequisite

Wikipedia Reference

http://en.wikipedia.org/wiki/Variable cost

Learning Material

Covered in Topic(s)

 
Cost Terms Concepts and Classification
Pricing Strategies