Variable Costs

A variable cost is an ongoing cost that changes in value according to factors like sales revenue and output. Variable costs include labor, raw materials and distribution costs.

Variable costs are costs that change as the quantity of the good or service that a business produces changes. Variable costs are the sum of marginal costs over all units produced. They can also be considered normal costs. Fixed costs and variable costs make up the two components of total cost.

Common examples of variable costs include costs of goods sold (COGS), raw materials and inputs to production, packaging, wages, and commissions.

See Also

• Cost Optimization