A cost that changes in proportion to changes in the activity output volume is called a variable cost.
Any business's overall expenses are made up of both variable and fixed costs. Sales or production output determine variable costs.
An expense that fluctuates in relation to production output or sales is referred to as a variable cost.
Variable costs rise in response to rising production or sales and fall in response to falling output or sales.
Fixed costs, in contrast to variable costs, are unaffected by changes in production or sales volume.
Per unit produced, the variable cost of production is a fixed sum. Variable costs will rise as output and production volume do as well. On the other hand, the variable costs related to production will therefore go down if fewer products are created.
Hence, A cost that changes in proportion to changes in the activity output volume is called a variable cost.
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