Variable Costs Measure
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A Variable Costs Measure is a cost measure based on costs that change in proportion to the good or service that a business produces.
- Context:
- It can range from being a Direct Variable Cost to being an Indirect Variable Cost.
- Example(s):
- Counter-Example(s):
- See: Marginal Cost, Cost Object, Overhead (Business), Indirect Costs, Marketing.
References
2015
- (Wikipedia, 2015) ⇒ http://en.wikipedia.org/wiki/Variable_cost Retrieved:2015-6-22.
- Variable costs are costs that change in proportion to the good or service that a business produces.[1] Variable costs are also the sum of marginal costs over all units produced. They can also be considered normal costs. Fixed costs and variable costs make up the two components of total cost. Direct costs, however, are costs that can easily be associated with a particular cost object.[2] However, not all variable costs are direct costs. For example, variable manufacturing overhead costs are variable costs that are indirect costs, not direct costs. Variable costs are sometimes called unit-level costs as they vary with the number of units produced.
Direct labor and overhead are often called conversion cost,[3] while direct material and direct labor are often referred to as prime cost.
In marketing, it is necessary to know how costs divide between variable and fixed. This distinction is crucial in forecasting the earnings generated by various changes in unit sales and thus the financial impact of proposed marketing campaigns. In a survey of nearly 200 senior marketing managers, 60 percent responded that they found the "variable and fixed costs" metric very useful.[4]
- Variable costs are costs that change in proportion to the good or service that a business produces.[1] Variable costs are also the sum of marginal costs over all units produced. They can also be considered normal costs. Fixed costs and variable costs make up the two components of total cost. Direct costs, however, are costs that can easily be associated with a particular cost object.[2] However, not all variable costs are direct costs. For example, variable manufacturing overhead costs are variable costs that are indirect costs, not direct costs. Variable costs are sometimes called unit-level costs as they vary with the number of units produced.
- ↑ Garrison, Noreen, Brewer. Ch 2 - Managerial Accounting and Costs Concepts, pp 48
- ↑ Garrison, Noreen, Brewer. Ch 2 - Managerial Accounting and Costs Concepts, pp 51
- ↑ Garrison, Noreen, Brewer. Ch 2 - Managerial Accounting and Costs Concepts, pp 39
- ↑ Farris, Paul W.; Neil T. Bendle; Phillip E. Pfeifer; David J. Reibstein (2010). Marketing Metrics: The Definitive Guide to Measuring Marketing Performance. Upper Saddle River, New Jersey: Pearson Education, Inc. ISBN 0-13-705829-2. Content used from this source has been licensed under CC-By-SA and GFDL and may be reproduced verbatim. The Marketing Accountability Standards Board (MASB) endorses the definitions, purposes, and constructs of classes of measures that appear in Marketing Metrics as part of its ongoing Common Language in Marketing Project.
2014
- http://www.investopedia.com/terms/v/variablecost.asp
- QUOTE: A corporate expense that varies with production output. Variable costs are those costs that vary depending on a company's production volume; they rise as production increases and fall as production decreases. Variable costs differ from fixed costs such as rent, advertising, insurance and office supplies, which tend to remain the same regardless of production output. Fixed costs and variable costs comprise total cost.