Variable costs

Costs whose total changes with activity over a specified time period and relevant range. They need not change in perfect proportion: the cost per unit can vary. Materials and per-sale commissions may qualify; subcontractor and travel costs depend on the arrangements.

Variable costs in round numbers

Hypothetical: materials cost US$40 per widget over the production range being considered. At an assumed constant unit cost, 100 widgets require US$4,000 of materials. A per-sale commission would be a separate variable cost; none is included in this calculation.

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