Explanation of variable cost formula

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If you know anything about economics or entrepreneurship, you probably know what "cost" means in business. It's an expense that's necessary to keep your business running. But did you know that there are two types of costs: fixed and variable? Is that right? In this article, we'll introduce you to the latter, "variable costs." Our goal is to look at the formula for variable costs, explain it, and go into a bit more detail to give you some insight into how to make your business better.

First, what are variable costs?
As we've said, there are two types of costs involved in running belgium telegram database a business, and having the ability to monitor, reduce and change your total costs is a great way to optimize the performance of your business.
Fixed costs (also known as overhead or indirect costs) are, unfortunately, not something you can optimize. For example, the rent you pay for your company's office is a type of fixed cost. So is the salary you pay to your employees. These are unavoidable and do not affect the productivity of your business.

Variable costs, on the other hand, are directly related to the scale, efficiency, and practices of your business. There are many ways to reduce, change, add, or eliminate variable costs, so this topic is something that not only finance and accounting professionals but also small business owners should be familiar with. Needless to say, you can calculate your variable costs. The diagram below shows what variable and fixed costs are (with examples).