Glossary of Terms

Variable Cost 2019-10-07 08:00:00

Variable Cost

A variable cost is an expense that fluctuates in proportion to a firm’s level of production. An example of a variable cost is a utility expense, which fluctuates on a monthly or annual basis depending on the amount of electricity and/or water a firm needs in the production of its goods or services.

Variable costs differ from fixed costs, which do not change based on the production of a good or service. An example of a fixed cost is rent, which is a contractual amount to be paid on a regular schedule over a defined period of time.