![]() Use this formula to find the total variable costs: To find your total variable expenses, multiply the total products or services you sell by the variable cost per unit. ![]() Total variable costs = total number of a product or service sold X variable cost per unit Let’s say you own a business that sells T-shirts. The cost per unit, or the cost to you for each T-shirt, is $10. Your total variable costs are $8,000 (800 X $10). If your business’s sales increase, the variable costs will increase. If your business’s sales decrease, your variable costs will decrease. Rising variable costs are not always bad news for your business. When sales rise, you need to make more products or prepare to perform more services. The amount you spend on variable costs increases. But, the rise in sales also brings more revenue into your business.Īs revenue increases, so do the variable costs. But, your revenue should increase faster than your expenses. If your variable costs rise faster than your revenue, you won’t make a profit.įor example, last month, your variable costs were $3,000 and your revenue was $5,000. ![]() This month, variable costs double, but the revenue only increases by 10%. The variable costs are $6,000, while revenue is $5,500. Because the variable costs increase faster than revenue, you lose money. ![]()
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