Variable Cost

Last Updated: Jun 7, 2019

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A variable cost is a cost that changes in relation to production volume. As production volumes increase, so will variable costs. As production volumes decrease, so will variable costs. An example of variable costs would be raw materials. If a company produces more product, the amount of raw materials will increase correspondingly. This compares to fixed costs, that as the name implies, remain fixed regardless of production volumes. Building rent is a common example of a fixed cost.