What are variable costs Lets take the case of a manufacturin

What are variable costs? Let\'s take the case of a manufacturing firm, what would be examples of variables costs versus fixed ones?

Solution

Variable costs are the cost that varies with the level of output produced, it will increase or decrease depending upon the production volume of any manufacturing unit. It rises when the production increases and it falls when production decline. Examples of Variable Cost and Fixed Cost under manufacturing firm: Variable Cost: Direct Labour cost, Direct Material Cost, Peice rate labour, Commission, Freight out, Credit card fees etc. Fixed Cost: Rent, Salaries, Depreciation, Insurance expense, Interest Expense etc.