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Variable Cost


A variable cost is a business expense that changes proportionally with each additional unit produced or sold; increased production will increase variable costs, whereas a decline in production will decrease variable costs.

Total Variable Cost = Total Quantity of Output x Variable Cost Per Unit of Output

Accrued expenses are listed on a business organization’s balance sheet as liabilities. Some variable costs are considered accrued expenses because they increase for each additional unit of production, unlike fixed costs. The raw materials required to manufacture a product, direct labor, and commissions are variable costs because those costs rise as the quantity of output rises.