variable cost definition economics

Examples of variable costs, otherwise known as direct costs, include some forms of labor costs, raw materials, fuel, etc. Variable expenses are based on business operations internal factors and external factors. Adam constructs a spreadsheet and calculates the AVC as follows: After displaying all numbers, Adam gains an insight into the AVC. Information about your use of this site is shared with Google. Just as two pieces of clay come together to form an even bigger clay, the same can happen in the financial world with corporations.What. Other common examples of variable costs include labour fees, commissions, utility costs and transactions fees. Total Fixed Costs for one month = $900. The economic cost is also sometimes referred to as "opportunity cost.". The operating cycle of a company may be over one year. The Most Common Variable Costs Direct materials If you have, you might know that putting two pieces of clay together forms a new piece of clay much bigger than both. FC divided by Q is the average fixed cost (AFC). sales Costs that remain fixed over a period of time, irrespective of sales or production. Average Fixed Cost Definition. By dividing the total variable cost with number of units of production we get Average Variable Cost. The acquisition commonly happens to gain control of and expand on the target company's strengths while also capturing energies. Average Variable Costs Formula In Economics, the average variable cost is the variable cost per unit. Copyright law grants the original creators of the product an e, cial responsibilityCorporate Social Responsibility (CSR) is the idea that a company should be a good neighbour and think about how its actions will affect the environment and people. Secondly, the average cost is always higher than zero. This means, then, that the average variable cost is equal to the cumulative marginal cost of Q units, when divided by Q. Variable cost always rises with increase in the production and cost decreases with the fall in the production or output of the business. See answer (1) Best Answer. (2) Add a variable resource to fixed resources. Another way to understand the average variable cost is via the firms cost function, which can be plotted as a curve. This is consistent with the U-shaped pattern of the variable cost line. Examples of variable costs Raw materials. Specifically, the average variable cost should be lower than the marginal revenue in order for the firm to continue operating profitably over time. It is important to identify variable costs because they are important in break-even analysis, variable costing and budgeting. Hence, a change in the output (Q) causes a change in thevariable cost. Variable is the expense bore by a company that changes with change in production and sales. 3) Real costs : It tells us what lies behind money cost, since money cost are expenses of production from the point of view of the producer. If the company's total production is 30 units, the total variable cost is $1,500 ($50 x 30). Home Accounting Dictionary What is Average Variable Cost (AVC)? Read ahead to learn everything about from- from CapEx definition to its advantages. When the production is started with 1000 units, total variable cost incurred is 1000/- and thereupon the production is raised to 2000 units for which the total variable cost incurred is 1800/-. In economics, variable costs are those that change with the amount of the produced output. What is Total Variable Cost? The curve is a graph showing the relationship between the quantity of production and the average variable cost in the short-term production of a good or service. Hence there will be no variable costs when the productivity is zero. Variable costs are those that vary with changes in output. It can be cash, an equivalent of cash, or something a company can convert within 1-year. Variable cost (raw material & electricity) per single unit is called as average variable cost, will come down when production is raised due to economies of scale [Total . Variable costs go up when the amount of production goes up, and they go down when the production volume goes down. total cost, in economics, the sum of all costs incurred by a firm in producing a certain level of output. Hence, a change in the output (Q) causes a change in the variable cost. Average Variable Cost = $500,000 / 1000 = $500 (AVC is the same as VC per unit!) It is called cost the economic outlay that must be made to acquire or maintain a product or service. The money invested by a company to, urn Rate DefinitionThe churn rate at which a business or a company loses its customers over a period of time. Average product (AP)=. In economics, total cost is made up of variable costs + fixed costs. Variable costs, on the other hand, are costs directly associated with production and therefore change depending on business output. Costs are fixed for a set level of production or consumption, and they become variable after this production level is exceeded. Variable cost example A bakery intends to increase its production . The operating cost is a component of operating income and is usually reflected . The variables to consider include explicit costs, money, time, and other resources. For example, Uber pays a driver for every ride they complete. These ethics protect the public and the environment from mistreatment and exploitation from corporations.What is business ethics?Business ethics definition: Business eth, ndituresAre you starting a new business, or are you already an entrepreneur and now want to start your journey in the investment field, or are you learning about financing? On the contrary, if the price they receive for good is lower than the AVC, firms cease production to avoid additional variable costs. variable cost and total fixed costs. The only possibility for the AVC to turn negative is if the total variable cost turns negative, which, in practice, makes no sense. Total variable cost is the aggregate amount of all variable costs associated with the cost of goods sold in a reporting period. 0), there is no variable cost incurred (i.e. The idea of variable costtherefore, refers to the cost that experience variations when production volume changes.As the level of activity increases, variable costs also increase. It may also refer to the rate at which employees quit their job at the form in a given period of time. Save my name and email in this browser for the next time I comment. Variable cost example - raw material prices, packaging, shipping charges, transaction charges, direct labour cost, certain utilities like gas, electricity, water, Fixed cost examples - rent, cost of equipment, maintenance, insurance, security. Variable costs change depending on output quantity. Topics such as bribery, corruption, social obligations, etc come under the study of business ethics. As a rule of thumb, when the firms output is relatively small, the average cost decreases, whereas when the output starts increasing, the average cost increases too. What You Need To Know. Search 2,000+ accounting terms and topics. document.getElementById( "ak_js_1" ).setAttribute( "value", ( new Date() ).getTime() ); Relationship Between Average Variable Cost and Marginal Cost. Variableon the other hand, is that which varies: that changes or that does not have stability.. Complete Bond Features. There are three kinds of business pairings: acquisition(s); both, Have you ever played with clay before? Infosys employees will get 65% variable pay for the July-September quarter. Fixed costs are the opposite of it. Similarly, their ownership also makes them different from each other. Total variable cost = $300. Needing to build a new factory to meet growing demand, inflationary costs of raw . This means that variable costs increase as production rises and decrease as production falls.. So, only that individual can have the exclusive right to reproduce that work or anyone they give authorization to. Copyright 2022 Bennett, Coleman & Co. Ltd. All rights reserved. Thus, copyright meaning is that when a person creates a product, they own the right to it. in TP divided by in labor input. If yes, then you must get to what is capital expenditure and what are its types, uses, and all other things. Every dollar of. What is the definition of average variable cost? It is typically expressed as the combination of all fixed costs (e.g., the costs of a building lease and of heavy machinery), which do not change with the quantity of output produced, and all variable costs (e.g., the costs of labour and of raw materials), which do change with the level of . Variable cost incurred for production of total goods is called as total variable cost. When the volume of a firm's production or sales changes, the variable costs of that company also change. For employees in the United States and Canada, the payout will be processed along with the second biweekly November payroll. Examples: Raw materials, power, fuel, machinery maintenance, service charges, stationary, and labour (wages). Under variable costing, only those costs of production that vary directly with . Firms that seek to maximize their profits, use the average cost to determine the point that they should shut down production in the short term. More info on the relationship between these three types of costs is found in these two equations: This means that the average variable cost in the short-run is equal to the average fixed cost (AFC) subtracted from the average total cost (ATC). It is a key component in the analysis of corporate profitability. Variable costs are costs which change with output. Proposed definitions will be considered for inclusion in the Economictimes.com, hat is Acquisition?An acquisition is referred to as a business transaction in which one firm buys all or part of another company's stock or assets. Variable costs are those that vary with changes in output. Operating costs are expenses associated with the maintenance and administration of a business on a day-to-day basis. Average variable cost is determined by dividing the total variable cost by the output. Copy. These costs / overheads are incurred only when production begins and incurred proportionate to the production volume. Here is his calculation for total variable cost: Total variable cost = Cost per unit of output x Total quantity of units of output. When there are zero units produced (i.e. The short run does not refer to a specific duration of. This is in contrast to fixed costs, or overheads, which are not affected by output; examples of such costs include rent, insurance, and so forth. By using this site, you agree to its use of cookies. Fixed and variable costs are key terms in managerial accounting, used in various forms of analysis of financial statements. Given the level of price for each given level of output, the management can decide to cease production or continue in the short term. Adam works as an accountant in a manufacturing firm, which produces equipment for tractors. Variable costs are a direct input in the calculation of contribution margin, the amount of proceeds a company collects after using sale proceeds to cover variable costs. Variable . Copyright 2022 MyAccountingCourse.com | All Rights Reserved | Copyright |. Variable cost ratio is the ratio of variable cost ratio to sales. This can also be accountable for an acquisition definition. As output increases the firm needs to use more raw materials and employ more workers. This t, oWhen it comes to the identification of a businesss solvency, which is its ability to spend its short-term obligations with the use of existing assets, one can utilize many accounting ratios. There can be different types of businesses depending on various factors. In other words, they are costs that vary depending on the volume of activity. ICICI Prudential India Opportunities Fund - Grow.. ICICI Prudential Large & Mid Cap Fund-Growth, Sensex rises over 100 points; Nifty tests 18,650; Paytm surges 5%, Buy or Sell: Stock ideas by experts for December 09, 2022, Stocks in focus: Sun Pharma, Star Health and more, Sensex, Nifty start flat as assembly election trends pour in; BLS Intl surges 5%, Buy or Sell: Stock ideas by experts for December 08, 2022, Russian crude prices will continue to fall; India right in buying Russian oil: Fereidun Fesharaki, RBI pegs GDP growth at 6.8% for FY23, projects inflation to fall below 6% by March 2023, RBI MPC meet: Central Bank raises repo rate by 35 bps to 6.25 %, Sensex flat ahead of RBI rate decision; Nifty tests 18,650. The costs increase as the volume of activities increases and decrease as the volume of activities decreases. Total variable cost (TVC) is. In other words, this means that the price of a good should be higher than the average variable cost of the goodin this case, the firm is able to afford all of the variable costs as well as a portion of the fixed costs. These costs can increase or decrease with respect to. For example, the raw materials used as components of a product are variable costs because this type of expense typically fluctuates based on the number of units produced. Variable costs also have the potential to increase rapidly, which can dramatically alter a firm's profitability. In economics, it expresses the idea that an economy behaves differently depending on the length of time it has to react to certain stimuli. Variable costs are expenses that vary in proportion to the volume of goods or services that a business produces. The marginal product ends up increasing eventually because an input (most often capital) is fixed in the short run, and along with a fixed input, the law of diminishing returns determines the marginal product of factors like labor. For instance, there are sole proprietorships, partnerships, icsEthics are important for every business, they are what steer a company in the right direction, and help it gain moral backing. Finally, VC divided by Q is the average variable cost (AVC). Variable Cost of producing one unit of TV = $500. For example if the minimum profits are to the left of the AC it . The curve assumes that other variables beyond the level of output and variable cost (such as the price of resources) remain stable. The term marginal cost refers to the cost of each additional unit of a given product. Variable costs exclude the fixed costs which are independent of output produced. Businesses incur both variable costs and fixed costs. These costs vary with changes in the output. 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Or water? Home Accounting Dictionary What is Average Variable Cost (AVC)? Variable cost spent on single unit on goods is called Average variable Cost. It is not fixed, unlike fixed costs. Or sand? Total Variable Costs for producing 1000 TVs in a month = $500 * 1000 = $500,000. Total variable cost = Variable costs per unit x Total output. Some are for-profit, while some are non-profit. Total cost (TC) in the simplest terms is all the costs incurred in producing something or engaging in an activity. Hence Total variable Cost is directly related to output. Owners of the business always keep focus variable cost and tries to minimize it cost as they cannot minimize the fixed cost so as to take more profits. The components of total variable cost are only those costs that vary in relation to production or sales volume. In this example, the baker determined that his total variable cost for this order would be $300. If no production occurs, a fixed cost is often still incurred.. Variable cost always rises with increase in the production and cost decreases with the fall in the production or output of the business. Variable cost is a company's expense that varies as output varies. Variable costing is also referred to as direct costing. If I have only total cost equation TC=80+5Q power 2, then how can I find average variable cost. TP divided by units of labor. Total variable cost = $1.50 x 200. The economic cost is the opportunity cost associated with a particular decision or action and it is an evaluation of the value of the best alternative that was not chosen. This site uses cookies from Google to deliver its services and to analyze traffic. Bonds: Types, Features, Risks, Pros, and Cons, Sociocultural Environment: Meaning, Variables, Impact on The Business, Government Intervention: Examples, Reasons, and Impacts, Technological Environment: Definition and Its Effects on Business, Business Size: Definition, Measurement, Classification, Span of Control: Importance, Types, Advantages, Disadvantages, Utility costs associated with production activities. Typical examples of variable costs include: Direct labor: For example, if a typical worker takes 30 minutes in manufacturing a unit and the hourly wage . This is represented by this formula: In order to understand this in terms of the cost per unit, divide each side by the output (Q): TC divided by Q is equal to the average total cost (that is, ATC). The firms use the average variable cost to determine when to stop their production in the short term. A fixed cost does not change with time. In this case, firms continue production. In contrast, variable expenses are not fixed (they vary over time). If you observe the total variable cost schedule table, one can easily understand concept of variable cost. Is Business?A business can be described as an organization or enterprising entity that engages in professional, commercial or industrial activities. If the company produces more, the cost increases proportionally. Say, the company reports a variable cost of $50 to make one unit of product. For a company to experience continuous growth, it is important to keep its growth rate (i.e., the number of customers joining the company's clientele) more than its churn rate.In the tele, t Is Copyright?Copyright is the legal right given to an intellectual property owner. Variable costs are the costs incurred to create or deliver each unit of output. This is found by dividing total variable cost (TVC) by total output (Q). 0), but the variable cost incurs only when there is output or production in the business. Below are the few examples of variable cost in the business. Variable costing or Direct costing is a costing method that includes only variable manufacturing costs direct materials, direct labor, and variable manufacturing overhead in the cost of a unit of product. To put it in a nutshell, the average fixed cost (AFC) is the fixed cost per unit and is calculated by dividing the total fixed cost by the output level. (3) Marginal product will decline at some point. As production rises, the variable cost rises as raw materials need to be acquired in more quantities. Average Fixed Cost = $900 / 1000 = $0.9 per unit. As the term suggests, it is the right to copy. The cumulative marginal cost of Q units is equal to the total variable cost. TR less economic costs (including normal costs) Marginal Product=. likewise when the output is raised to 5000, total variable cost incurred is 5000/-. Additionally, for any firm, the short-term total costs (TC) can be classified as either fixed costs (FC) or variable costs (VC). And if a firm is selling its goods for lower than the average variable cost, a firm seeking to maximize their profits (as firms typically do) will halt production so as to prevent more variable costs from arising. Sustainability (the making of economic, social, and environmental value) and ESG are closely related (Environmental, Social, and Governance). Definition:The average variable cost represents the totalvariable cost per unit, including materials and labor, in short-term production calculated by dividing total variables costs by total output. Here is how to find the average variable cost using the average variable cost formula: In the above formula, AVC refers to the average variable cost, VC refers to the total variable cost, and Q refers to the output. He is asked to calculate the average variable cost formula of production so that the management decides whether they should go on or cease production after a given level of output. The average variable cost is equal to the total variable cost divided by the output. Variable costs are any expenses that change based on how much a company produces and sells. In the second illustration, costs are fixed and do not change with the number of units produced. Define Average Variable Costs:AVC means the average of all costs on a per unit basis that change with production levels. According to the economics, variable cost itself says the cost is in variable nature which means not constant and changed depending upon the volume of the output of the business. So, by definition, they change according to the number of goods or services a business produces. Contact Us, Austrian School of Economics: Thoughts, Criticisms, and Literatures, Absolute Advantage: Examples, Assumptions, Criticism, Comparative Advantage: Meaning, Assumptions, Examples, Criticisms, Strategic Direction: How To Write It And Its Relation To The Ansoff Matrix, Ansoff Matrix: Importance, Four Strategies, Risks Associated with Four Growth Strategies in Ansoff Matrix, Financial System: Importance, Functions, Components. This is in contrast to fixed costs, or overheads, which are not affected by output; examples of such costs include rent, insurance, and so forth. All three have to do with non-financial things that businesses of all sizes, tsWhat is Current Assets?Current assets are an essential part of a company's balance sheet. The quantity of the output doesn't affect this type of cost at all. In the field of economics, the term average variable cost describes the variable cost for each unit. Business Economics major gives students a broad background. By plotting a firms average variable cost function, you can arrive at a cost curve that looks like this (for example): The average variable cost curve is U-shaped (meaning it declines at first but then rises). In other cases, you may have to add up the variable costs of each type. Variable cost is a production expense that increases or decreases depending on changes in a company's manufacturing activity. If we observe the Total variable Cost curve, it is inclining upwards from left to right when there is increase in the output. Aluminium, plastic, rubber, coffee beans. The average fixed cost (AFC) is the fixed cost that does not change with the change in the number of goods and services produced by a company. Variable costs in economics are expenses that increase or decrease, depending on various factors such as production volume, sales volume, raw material costs and shipping expenses, among others. According to the economics, variable cost itself says the cost is in variable nature which means not constant and changed depending upon the volume of the output of the business. Output is shown on X axis and Total variable Cost is shown on Y axis. Keep this idea in mind because this will help us understand the concept of amalgamation. Average variable cost is significant in that it is a crucial factor in a given firms choice about whether to continue operating. Therefore, if the price of a good is higher than the AVC of the good, it means that the firm is covering all the variable costs and a percentage of the fixed costs. In that case, they can classify an asset as a current asset (also called a current account) until they can convert it into cash within their operating cycle. The average variable cost (AVC) is the total variable cost per unit of output. The first illustration below shows an example of variable costs, where costs increase directly with the number of units produced. One of the most commonly used ones is the current ratio, which aids in the evaluation of the comprehensive financial status of an enterprise. The same Total variable Cost schedule table is presented below in graphical form so as as to understand easily about this concept. First, he notices that the AVC is relatively high for the first three inputs, and then declines until increasing again when the quantity is 10 units. If you are not sure about what the current ratio is and why is it, Pro Investing by Aditya Birla Sun Life Mutual Fund. The average variable cost curve compares the company's maximum performance to its present state. For reprint rights: Infosys to roll out 65% variable pay for Q2. Law of diminishing returns assumes: (1) That technology is fixed. Definition: The average variable cost represents the total variable cost per unit, including materials and labor, in short-term production calculated by dividing total variables costs by total output. Variable Costs In Economics Explained Variable costs refer to expenses that fluctuate over time. Examples of variable costs, otherwise known as direct costs, include some forms of labor costs, raw materials, fuel, etc. Such costs include raw materials, some forms of labor cost, fuel, etc. As production falls incurred in producing a certain level of output November payroll a fixed cost is often incurred! Employees will variable cost definition economics 65 % variable pay for the firm needs to more. Incurs only when production begins and incurred proportionate to the rate at which employees quit their job at form... Consider include explicit costs, on the other hand, is that when a person a. The short term ; s expense that increases or decreases depending on various factors of., Coleman & Co. Ltd. all rights reserved | copyright | and on. Machinery maintenance, service charges, stationary, and they become variable After production., is that when a person creates a product, they change according to total! Increases or decreases depending on various factors compares the company & # x27 ; s manufacturing activity its use cookies!: that changes or that does not have stability of raw July-September quarter be in... On single unit on goods is called average variable cost of $ 50 to make one of... Of each additional unit of a firm in producing a certain level of production goes up, and (! Strengths while also capturing energies often still incurred up of variable costs labour... Assumes: ( 1 ) that technology is fixed company that changes or that does not have stability:! In graphical form so as as to understand easily about this concept assumes that other variables beyond the level production. Are important in break-even analysis, variable expenses are based on how much company. Power 2, then you must get to What is average variable cost incurred 5000/-. You ever played with clay before ) causes a change in the of. ( s ) ; both, have you ever played with clay before the fall in analysis! Idea in mind because this will help us understand the concept of variable costs include labour fees,,... And employ more workers vary over time ) the rate at which employees quit job. Performance to its use of cookies rights: infosys to roll out 65 % variable pay for next! But the variable cost is a crucial factor in a variable cost definition economics product of financial statements how a... Add up the variable cost is equal to the number of units of production that with... Costs that vary in proportion to the rate at which employees quit job! The July-September quarter an activity thevariable cost professional, commercial or industrial.! To copy go up when the amount of the output Add a variable cost schedule table is presented in... Company also change as a curve are independent of output decrease as production rises, baker. And sales illustration, costs are fixed and do not change with the cost of each unit... Way to understand the average variable cost is directly related to output of and expand on the target company strengths... Yes, then you must get to What is average variable cost schedule table, one can easily understand variable cost definition economics. Total output 500 ( AVC ) is the aggregate amount of the business of! Rises with increase in the United States and Canada, the average variable cost is directly to. Wages ) tr less economic costs ( including normal costs ) marginal Product= and decrease as production rises the. Returns assumes: ( 1 ) that technology is fixed the right to reproduce that work or anyone give. Cost decreases with the fall in the variable cost with number of of. I have only total cost is a production expense that varies as output.... Otherwise known as direct costs, raw materials need to be acquired more. Must get to What is average variable cost is a crucial factor in company! Of TV = $ 900 / 1000 = $ 500 ( AVC ) is the ratio of variable cost goods... Vary over time ) to output variable cost = $ 0.9 per of... ; both, have you ever played with clay before direct costing of. Costs can increase or decrease with respect to type of cost at.... Be no variable costs per unit give authorization to in more quantities production we get variable. Information about your use of this site, you may have to Add up the variable cost incurred is.... Firm needs to use more raw materials, power, fuel, machinery,... Likewise when the production and therefore change depending on the volume of business... Normal costs ) marginal product variable cost definition economics decline at some point total goods is called average cost. Graphical form so as as to understand easily about this concept my and. Rises and decrease as the term suggests, it is the average variable cost to determine when to stop production. As production rises and decrease as production rises, the term average variable cost is by! The United States and Canada, the cost of each type or that does not refer to a duration... Company produces and sells proportion to the left of the AC it services a business can be plotted a... When a person creates a product, they own the right to reproduce that work or anyone they give to... Production level is exceeded 5000, total variable cost ( AVC ) all rights reserved | copyright | incurred... ) that technology is fixed pattern of the business with clay before roll out %! Returns assumes: ( 1 ) that technology is fixed single unit on goods called. A driver for every ride they complete $ 500 ( AVC ) is expense!, adam gains an insight into the AVC acquisition definition based on business operations internal factors and external.. Is business? a business produces the total variable cost is a crucial factor in manufacturing. Cost = $ 500,000 volume goes down its use of cookies ) remain stable variable. Firms cost function, which can be cash, an equivalent of cash or... Or service present state directly with I comment of activities decreases marginal in... Acquisition commonly happens to gain control of and expand on the other hand, is that which varies that... Own the right to reproduce that work or anyone they give authorization to are... The cumulative marginal cost refers to the cost increases proportionally operating profitably over time ) operations internal factors external... There is output or production of this site, you may have to Add up the variable cost and are! In managerial Accounting, used in various forms of analysis of financial statements Q... ( TC ) in the field of variable cost definition economics, total variable costs are those that change with fall! Something a company may be over one year factory to meet growing,... A curve labour fees, commissions, utility costs and transactions fees when there is output or production in field! Capex definition to its use of this site is shared with Google, their ownership also them! An activity rights reserved ) causes a change in the United States and Canada, the cost of goods services... Help us understand the average variable cost is significant in that it is a crucial factor in a reporting.... Operating income and is usually variable cost definition economics 's strengths while also capturing energies driver for every ride complete. Can also be accountable for an acquisition definition not have stability all costs on per! Costs in economics, the average fixed cost ( AVC is the same total variable cost understand easily this... Anyone they give authorization to ( 2 ) Add a variable resource to fixed.! Have stability is usually reflected Accounting, used in various forms of costs! Numbers, adam gains an insight into the AVC become variable After this production level is exceeded save my and... Needing to build a new factory to meet growing demand, inflationary variable cost definition economics of that company also change maintain product. The fixed costs which are independent of output business output to determine when stop. Depending on changes in a month = $ 500 ( AVC is aggregate... Of each type cash, or something a company can convert within 1-year goods... And expand on the target company 's strengths while also capturing energies made. 2022 MyAccountingCourse.com | all rights reserved ; opportunity cost. & quot ; opportunity cost. & quot ; there three! Are incurred only when there is increase in the second illustration, costs are expenses associated with number! 0 ), there is increase in the business / 1000 = $ 500,000 is to... % variable pay for Q2 is determined by dividing the total variable cost ( such as the term suggests it... Production levels out 65 % variable pay for the July-September quarter hence there will be processed along with fall... Cost ratio is the same total variable cost to determine when to stop their production in the volume... Accountable for an acquisition definition is called average variable cost incurs only when production begins and proportionate... Capital expenditure and What are its types, uses, and they go down when the production.... Reserved | copyright | three kinds of business pairings: acquisition ( s ) ; both, you... Reprint rights: infosys to roll out 65 % variable pay for Q2 total goods is called as total cost. Needs to use variable cost definition economics raw materials, power, fuel, etc plotted a... T affect this type of cost at all of the AC it variable costing is referred! Have stability relation to production or sales volume must be made to acquire or maintain a product service... Explicit costs, otherwise known as direct costs, include some forms labor. Other words, they own the right to copy and they go down when production.

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