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Unlike fixed costs, which remain constant regardless of output, variable costs are a direct function of production volume, rising whenever production expands and falling whenever it contracts. Along with fixed costs, variable costs make up the two components of total cost. Examples of common variable costs include raw materials, packaging, and labor directly involved in a company's manufacturing process...

Examples of common variable costs include raw materials, packaging, and labor directly involved in a company's manufacturing process. Below is the graph for variable cost:

Variable cost graph

Example of a variable cost for a car manufacturer that will be introducing a new engine is sea freight. Sea freight is charges paid for carriage or transportation of goods (cargo) by sea...

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