Variable Costs
Expenses changing with production/sales volume.
Formula
Total Variable Costs = Units Produced × Variable Cost per Unit
Real World
McDonald's spends more on beef, buns, and packaging every time it sells an extra burger — these direct material costs rise and fall in direct proportion to the number of meals served.
Exam Focus
In break-even calculations always confirm variable cost per unit is constant across all output levels, or state any assumption you are making.
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