What are Variable Expenses

In cost accounting, variable expenses are those expenses which change due to change in the production or sales or any other activities. If variable expenses relating to production, then increase in the production will increase these variable expenses. If variable expenses are relating to sales, then increase in the sale will increase these variable expenses. In summary, we spend different amount on these expenses on the basis of production and sales.


More Explanation of Variable Expenses

Variable expenses have direct relationship with the products which are producing bycompany. Any change in the production will change in the variable expenses with a specific proportion. When we make the list of all variable expenses and make a total, it will be variable cost which will be the part of our total cost. Variable cost is also called marginal cost. Because marginal cost and variable cost has same definition.


 Examples of Variable Expenses


1. Expenses on Raw Material

We buy the raw material on the basis of our production. If we have obtained big order. We start to produce more quantity. For this, we have to buy more raw materials. In the other side, if we are not receiving order, we reduce to buy the raw material. For example, in the summer season, we do not produce winter clothes. So, these hot clothes will buy less in summer.


2. Electricity Expenses


If we have to use more machines for production, we need to pay more electricity expenses.


3. Labor Cost


 If we pay the laborers on the production, then it will be our variable expense because if we produce more, we need more laborers, so we have to make more labor cost.


 4. Commission on Sales


It is also variable expense which change in proportion to the quantity of sales.