Variable costs are expenses that change in proportion to the activity of a business. Variable cost is the sum of marginal costs over all units produced. It can also be considered normal costs. Fixed costs and variable costs make up the two components of total cost.
Variable costing is a method in which the fixed manufacturing overheads are not allocated to units produced but the whole amount is charged against revenue in the period in which they are incurred.
A cost that is directly proportional to the volume of output produced. When production is zero, the variable cost is equal to zero. A variable is a cost of producing the product which a company sells.
A cost or expense where the total changes in proportion to changes in volume or activity.
By F. John Reh
Definition: Variable Costs are expenses that vary based on production volumes. They include material, labor, production utilities, etc.
~ is an operating expense, or operating expenses as a class, that varies directly, sometimes proportionately, with sales or production, facility, utilization, or other measure of activity.
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~s = Total Costs - Fixed Costs
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The opposite of ~s are fixed costs. In between are semi-~s that have fixed and variable elements.
A high level of ~s means a low level of operational gearing.
~s refers to the constantly changing cost of labor or raw materials influenced by the volume of production or internal company decisions.
~ The expenses that vary proportionately with the level of production activities or volume of output of any business. Examples include materials, electricity, and lubricants.
Fixed, ~s and break-even
The break-even point of a business is the level of output or sales at which the revenue received by the business is exactly equal to the cost of making (or selling) that output.
Cost determined by dividing total ~ by the number of units of output.
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Average ~ ...
~ - Costs that fluctuate in direct proportion to the volume of units produced. The best and most obvious example are physical costs of goods sold, direct costs, such as materials, products purchased for resale, production costs and overhead, etc.
~ A type of cost, where the change in cost is proportional to the change in the company's production. A zero production equals a zero ~. Random Finance Terms for the Letter V Value Investing Value Manager Vanilla Issue Vanishing Premium … [Read more...
A method of costing in which only variable production costs are treated as product costs and in which all fixed (production and non-production) costs are treated as period costs.
activity based costing (ABC) ...
~s. Costs that change as a direct result of a change in production volume.
Part of a firm's production costs that changes according to how much OUTPUT it produces. Contrast with FIXED COSTS. Examples include some purchases of raw materials and workers' overtime payments. In the long run, most costs can be varied.
Velocity of circulation ...
~s are those that are not incurred if no production takes place. They only occur when production begins; these costs vary with the level of production. For example, direct labor costs and raw material costs depend on the level of production.
~: a cost of production that is directly proportional to the number of units produced
variable interest rate: an interest rate that changes, usually in relation to a standard index, during the period of the loan ...
~s - production costs that change when the level of production changes, so that when more is produced the costs increase; as opposed to fixed costs.
~ - A cost that varies with output levels.
~ing - Is a costing method in which the costs to be inventoriedinclude only the variable manufacturing costs.
~ing: A calculation of product costs that includes all direct manufacturing costs and variable manufacturing overhead, but not fixed manufacturing overhead. Under ~ing, fixed manufacturing overhead is treated as a period cost.
~s. Costs that change in direct proportion to the amount of product manufactured. For example, the cost of direct materials depends on the number of units produced. Contrast with Fixed Costs.
~: Any costs which change significantly with the level of output. The obvious example is cost of materials.
~s costs of production that vary with the quantity of production. (6, 8)
velocity a measure of how fast money is turned over in the economy: Velocity equals nominal GDP divided by the money supply. (24) ...
A financial indicator defined as current assets less current liabilities. If negative, it is a need, for cash resources to fund the normal activities of short-term.
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A ~ varies in direct proportion to changes in an activity index. Mathematically, we portray the activity index as an independent variable, while total cost is considered the dependent variable.
~: The cost associated with a factor of production that changes as the level of output changes.
VELOCITY OF MONEY: The average number of times that a given money supply is spent in an economy in one year.
WAGES: The price paid to labor.
Direct ~s: costs that fluctuate with the operations of the railway. Such costs would include fuel, train crew, traffic cost, yard & terminal cost, rolling stock and infrastructure maintenance.
~s, on the other hand, fluctuate in direct proportion to changes in output. Labor and material costs are typical ~s that increase as the volume of production increases.
~s vary in direct proportion to changes in activity. Activity is often defined as a measure of volume, such as units of goods or services produced, but can be defined as many other operational variables called cost drivers. ~s are constant on a per-unit basis.
~s - costs that changes as production changes, for example, raw materials, production labor, storage and shipping, etc.
A pricing method in which the selling price is established by adding a markup to total ~s. The expectation is that the markup will contribute to meeting all or a part of fixed costs, and generate some level of profit.
A cost that varies in proportion to the quantity produced. Theoretically, ~s are zero if there is no production. As opposed to fixed cost.
TOTAL ~ AND TOTAL PRODUCT: Because ~ is largely associated with the cost of employing a variable input in the short run, it's possible to derive the total ~ curve from the total product curve.
- The ~s per unit of holding an item in inventory for a specified time period.
Embedded terms in definition
Total ~s divided by the number of units produced.
Total Cost, ~, and Marginal Cost
Marginal Cost and the Price-Taking Firm's Optimal Output Rate
Average Cost and the Break-Even Output Rate
Supply, Demand, and Equilibrium
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Now let's do ~. The ~ is that portion of total cost that varies when the rate of output varies.
How much is the ~ of having one patient?
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The portion of a firm or industry's cost that changes with output, in contrast to fixed cost.
A tax on imports that varies over time so as to stabilize the domestic price of the imported good.
If Beginning Inventory = Ending Inventory, then Absorption Costing = ~ing
If Inventory Levels = Low, then ~ing Profit > Absorption Costing Profit
If Inventory Levels = High, then Absorption Costing Profit >~ing Profit ...
Investment contracts whose issuer pays a periodic amount linked to the investment performance of an underlying portfolio.
A cost that is directly proportional to the volume of output produced. When production is zero, the ~ is equal to zero.
Variable interest rate ...
A producers cost that varies as production varies, in contrast to fixed costs. Rent is an example of a fixed cost and raw materials of a var...(Read more)
Variable Interest Rate ...
Contribution: a term used in marginal costing - the difference between sale price and associated ~s.
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If the railroad has a shipper who has no good alternative means of moving his product, the railroad cannot charge more than 180 percent of ~s. In those 'captive shipper' cases, the shipper can bring a case before the STB asking the board to force the railroad to lower its charges.
The ratio of a company's fixed assets to ~s is called operational leverage (also known as operational gearing). For example, if a small firm has sales revenue of £1,000,000, fixed costs of £800,000 (e.g. staff wages and premises) and ~s of 10% of sales (i.
If a manager using an incremental approach to pricing a managed care contract considers the liquid contents and the depreciation expense of the system as the only ~s, he or she might conclude that a substantial discount can be offered, with the company still making money.
Because the ~s like buying ingredients are more important to the restaurant industry than fixed costs like rent, economies of scale rarely arise.
CONTRIBUTION MARGIN - The difference between variable revenue and ~.
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Break-even analysis finds this by dividing total fixed costs by per unit contribution to fixed costs (unit price - unit ~). Dollar value is calculated by multiplying break-even point by price per unit. Any per unit contribution to fixed costs beyond break-even point goes to profit.
Some costs are clearly not avoidable, for example capital costs, therefore, avoidable costs are often ~s. For example, it is the cost that can be saved by dropping a particular product line or salaries paid to employees in a particular department.
A forecasting tool used by marketers that considers product price, fixed cost and ~s in order to determine the minimum sales volume required before a company realizes a profit.
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Direct and Indirect Costs
Manufacturing Costs ...
A calculation that determines the volume of sales required to earn a profit. Assumptions regarding pricing, ~s, and fixed costs must be provided.
At this volume of sales, the company's total revenue equals its total costs.
Breakeven depends on the Cost structure (Split ~s/Fixed costs). There are three different breakevens: Operating breakeven, Financial breakeven, and Total breakeven. Breakeven is affected by company's industrial and financial strategy.
The point at which sales equal costs; the point is located by beakeven analysis, which determines the volume of sales at which fixed and ~s are covered. all sales over the breakeven point produce profits, any drop below the breakeven point produces losses.
Contribution margin: The difference between variable revenue and ~.
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Controlled disbursement: A service that provides for a single presentation of checks each day (typically in the early part of the day).
In this article, we will theorize about depreciation and pricing. There will be no mention about maintenance or other ~s.
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The difference between variable revenue and ~.
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A numerical and graphical technique that is used to determine at what point the firm will break even (a point of zero profit or loss). To compute the break-even point, divide fixed costs by price minus ~ per unit.
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A mathematical method for analyzing the relationships among a firms fixed costs, profits, and ~s to calculate the costs of running a business.
AIB (10th Edition)
A business with a physical retail location, e.g. a shop.
See also: What is the meaning of Index, Fixed cost, Expense, Transaction, Variable costs?