Total Variable Cost

Total Variable Cost refers to the expenses that change directly with the level of production or activity in a business. Unlike fixed costs, which remain constant regardless of output (like rent), variable costs increase or decrease as more or fewer goods are produced. For example, if a bakery bakes more bread, it incurs higher costs for ingredients and labor. Understanding total variable cost helps businesses make informed decisions on pricing, budgeting, and maximizing profits, as it reflects the costs directly associated with the production of goods or services.