Variable Costs/Expenses

Variable costs are those that vary with income levels.

A business produces income.

To produce this income, the business will incur costs.

These costs are made up of two parts.

One part comprises fixed costs (for more, see fixed costs)

The other part comprises variable costs.

Variable costs include things such as sales commissions, direct labor costs, and cost of materials used in production.

They are called variable costs because they vary dependent on revenue levels.

Variable costs are like a crane.

They lift revenue higher and higher.

In the process, they drive profit higher, as well.

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