Variable costs change with the level of output or production a business experiences. For GCSE Business students, it's important to understand that these costs increase as more products are produced and decrease when production levels drop. Common examples of variable costs include raw materials, direct labour, and utility costs directly associated with the manufacturing process.
Unlike fixed costs, which remain the same regardless of output, variable costs fluctuate with the business's operational activity. They are crucial for calculating the total cost of production and for decision-making related to pricing and budgeting.
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