Variable cost: Difference between revisions
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A cost which increases as the level of production (or other activity) increases, because it is incurred as a consequence of the production or other activity. | ''Cost and management accounting.'' | ||
A variable cost is a cost which increases as the level of production (or other activity) increases, because it is incurred as a consequence of the production or other activity. | |||
Contrasted with a fixed cost. | |||
Variable costs are generally easier to change - especially to reduce - when necessary, compared with fixed costs. | |||
Therefore a lower-risk operational strategy is normally to have a lower proportion of fixed costs in the total cost structure, and a higher proportion of variable costs. | |||
This proportion is sometimes known as operational gearing. | |||
== See also == | == See also == | ||
* [[Contribution]] | * [[Contribution]] | ||
* [[Cost behaviour]] | * [[Cost behaviour]] | ||
* [[Direct costs]] | |||
* [[Expense]] | |||
* [[Fixed cost]] | * [[Fixed cost]] | ||
* [[Flexible budgeting]] | * [[Flexible budgeting]] | ||
* [[Gearing]] | |||
* [[Indirect costs]] | |||
* [[Management accounting]] | |||
* [[Operational gearing]] | |||
* [[Semi-fixed cost]] | * [[Semi-fixed cost]] | ||
* [[Semi-variable cost]] | * [[Semi-variable cost]] | ||
* [[Total cost]] | * [[Total cost]] | ||
* [[Variable]] | |||
[[Category:Accounting,_tax_and_regulation]] | |||
Latest revision as of 16:15, 6 August 2021
Cost and management accounting.
A variable cost is a cost which increases as the level of production (or other activity) increases, because it is incurred as a consequence of the production or other activity.
Contrasted with a fixed cost.
Variable costs are generally easier to change - especially to reduce - when necessary, compared with fixed costs.
Therefore a lower-risk operational strategy is normally to have a lower proportion of fixed costs in the total cost structure, and a higher proportion of variable costs.
This proportion is sometimes known as operational gearing.
