Question

How do I find the variable costs and the variable expenses?

Answer 1

Variable costs are those costs which vary in proportion with the goods sold. These costs differ from fixed costs which remain constant irrespective of the volume of sales. For example: if the volume of production doubles, the cost of goods sold, labor cost and overhead such as electricity will also increase. Hence these are called variable costs.

On the other hand fixed costs such as rent paid for the facility, depreciation on plant and machinery will not change even if the volume of production doubles.