Variable Costs

Variable Costs are those costs associated with production that changes directly with the amount of production, e.g.,the direct material or labor required to complete the build or manufacturing of a product.

Variable costs are production-related costs that change directly with production volume, such as direct materials and direct labor (if variable).

- Used in product/service costing, budgeting, and variance analysis.
- Used to support pricing decisions and profitability analysis by cost behavior and drivers.

- Example: The costing team uses **Variable Costs** to allocate costs and analyze margins by product line.

- Why it matters: Improves cost accuracy, supports better pricing and budgeting, and strengthens performance measurement.