What are variable costs?

Variable costs are the expenses that are only incurred when a product is made or sold.

Variable costs are the expenses that are only incurred when a product is made or sold.

Examples include:

  • Cost of Goods
    • Raw materials
    • Finished goods
    • Direct labor
    • Production consumables (fuel, electricity, etc.)
  • Cost of Sales
    • Fulfillment labor
    • Shipping
    • Transaction fees
    • Platform fees
    • Commissions


Variable costs are directly related to how quickly a business will break even and become profitable:

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