Variable Cost - Business concept of the day

Variable Cost - Business concept of the day

Business Development

GlobalLinker Staff

GlobalLinker Staff

6 Aug 2018, 14:39 — 1 min read

Definition: A variable cost is a corporate expense that changes in proportion with production output. Variable costs increase or decrease depending on a company's production volume; they rise as production increases and fall as production decreases.


Example:
When the tyre manufacturer decided to scale up production to twice the present level, it was estimated that variable cost would rise by 75%.

Business Insight: Variable cost always goes up when production goes up, and decreases when production decreases.

 

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