Variable cost: Difference between revisions
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imported>Doug Williamson (Expand definition.) |
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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. | 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. | |||
Revision as of 15:19, 3 April 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.
