Variable costs rise when sales and production go up and they fall when sales and production volumes go down. In fact, variable costs and sales and production volumes rise and fall by the same percentage. Raw materials, manufacturing, labour and amortization are examples of variable costs.
Variable costs appear under cost of goods sold or cost of sales on a company’s income statement.
It is important for business owners to understand the dynamics of these costs so they can stay competitive.
More about variable costs
The income statement below shows the variable costs for a manufacturing company and how they factor into earnings before interest and taxes.