variable cost

  

Definition

A periodic cost that varies in step with the output or the sales revenue of a company.

Variable costs include raw material, energy usage, labor, distribution costs, etc. Companies with high variable costs are significantly different from those with high fixed costs. This difference affects the financial structure of the company as well as its pricing and profits. The breakeven point in such companies (in comparison with high fixed cost companies) is typically at a much lower level of output, but their marginal profit (rate of contribution) is also much lower.


Use variable cost in a sentence

  • I wanted my client to be aware of the variable cost component relating to the ownership costs of this new asset.

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  • There can be a high variable cost to certain goods so you should try and load up when the price is right.

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  • Some items may have a high variable cost so when the price is in your favor you should buy as much as you can.

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