variable cost
Definition
Periodic cost that varies, more or less, in step with the output or the sales revenue of a firm. These include raw material, energy usage, labor (wages), distribution costs, etc. Firms with high variable costs are significantly different from those with high fixed costs. This difference affects the financial structure of the firm as well as its pricing and profits. The breakeven point in such firms (in comparison with high fixed cost firms) is typically at a much lower level of output, but their marginal profit (rate of contribution) is also much lower.
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