Question

Define variable costs

Answer 1

[AI-generated answer — Bot GPT-4o]

Variable costs are expenses that change in direct proportion to the level of production or sales volume of a business. These costs increase as production or sales go up and decrease as production or sales go down. Examples of variable costs include raw materials, direct labor costs (assuming labor is paid per unit produced), and sales commissions. Understanding variable costs is crucial for businesses because it helps in budgeting, forecasting, and pricing strategies to ensure profitability.