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Accounting & Tax vocabulary · Costs & Budgeting

Variable cost

Meaning in accounting & tax, with examples

nounCore term

In accounting & tax, variable cost means: A cost that rises or falls in line with the volume of production or sales, such as raw materials, packaging or sales commissions.

In Turkish: değişken maliyet, değişken gider

How it is used

Paired with fixed cost. Revenue minus variable costs gives the contribution margin, which managers use for pricing and break-even decisions.

Example sentences

  1. Packaging is a variable cost: the more we sell, the more we spend on it.

  2. Variable costs per unit fell after we changed suppliers.

Common collocations

  • variable cost per unit
  • contribution margin
  • semi-variable cost
  • fixed and variable costs
  • fixed costA cost that stays the same in total whatever the level of production or sales, at least in the short term, such as rent, insurance or salaried staff.
  • break-even pointThe level of sales at which total revenue exactly covers total costs, so the business makes neither a profit nor a loss.
  • cost of goods soldThe direct cost of the products a company sold in a period, such as purchase price, materials and production labour. It is deducted from revenue to find gross profit.
  • budgetA financial plan that sets out expected income and spending for a future period, usually a year, and is used to control costs and compare actual results.

More terms: Costs & Budgeting

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This page explains English vocabulary for learners. It is not financial advice.