Based on the variability, there are three classifications of costs, namely fixed costs, variable costs and semi-variable costs. In finding the break even point (BEP), you must be able to distinguish between two types of costs, namely fixed costs and variable costs. Fixed costs are costs that do not change despite changes in the level of business activity in the short run.
Variable costs refer to the cost of elements that tend to change when there is a change in the level of production activity.
The following will discuss the meaning of variable costs and their functions in the company
Definition of Variable Costs
Variable costs are costs that always change in the production process. Changes in these costs are influenced by the volume of goods or products produced by a company. In contrast to fixed costs which will always be constant or not changing.
The amount of the variable cost is strongly influenced by the company’s production volume and the production strategy that has been set, is a reflection of the costs incurred based on the product output produced by the company. In the production process, these costs can be categorized as direct costs of the company. However, outside of production activities, not all variable costs can be categorized into the company’s direct costs.
Variable Cost Example
Relates to all activities related to production. Here are some examples:
• Direct Materials, namely materials related to the production process directly or goods used as raw materials. Direct materials can change according to the number of products produced by the company.