what is a variable cost 
a variable cost is an expense that changes in proportion to how much a company produces or sells variable costs increase or decrease depending on a company s production or sales volume they rise as production increases and fall as production decreases examples of variable costs include a manufacturing company s costs of raw materials and packaging or a retail company s credit card transaction fees or shipping expenses which rise or fall with sales a variable cost can be contrasted with a fixed cost investopedia sydney saporitounderstanding variable coststhe total expenses incurred by any business consist of variable and fixed costs variable costs are dependent on production output or sales the variable cost of production is a constant amount per unit produced as the volume of production and output increases variable costs will also increase conversely when fewer products are produced the variable costs associated with production will consequently decrease examples of variable costs are sales commissions direct labor costs cost of raw materials used in production and utility costs variable costs are usually viewed as short term costs as they can be adjusted quickly for example if a company is having cash flow issues it may immediately decide to alter production to not incur these costs 