Variable costs are those which are incurred on the use of variable factors. When the output changes, these costs also change. As the production increases, these costs also increase and as the production decreases these costs also fall. When the output is zero, then this cost is also zero. These costs are called Prime Costs or Direct Costs.
Variable costs are explained with the help of given table:
| Units of Output |
Variable Cost (Rs.) |
| 0 |
0 |
| 1 |
10 |
| 2 |
18 |
| 3 |
24 |
| 4 |
28 |
| 5 |
32 |
| 6 |
38 |
The above Table shows that as the output goes on increasing, the variable cost also goes on increasing. When output is zero, the variable cost is also zero. When output is one unit, the variable cost is Rs. 10, and when it reaches six units, the variable cost is Rs. 38.
