Editing Variable cost (section)

==Examples==
Some common examples include sales commission, labor costs, and the costs of [[raw material]]s.

For a [[clothing industry|business which produces clothing]], variable cost would include the direct material, i.e., cloth, and the direct labor. If the business uses a room, a [[sewing machine]], and 8 hours of a laborer's time with 6 yards of cloth to make a shirt, then the cost of labor and cloth increases if two shirts are produced, and those are the variable costs. The facility and equipment are fixed costs, incurred regardless of whether even one shirt is made. 

{| class="wikitable"
|-
!  !! 0 shirts !! 1 shirt  !! 2 shirts !! 3 shirts
|-
| Cloth (Direct Materials)|| 0yds || 6yds || 12yds || 18yds
|-
| Labor (Direct Labor) || 0hrs || 8hrs || 16hrs || 24hrs
|-
| Equipment || 1 machine|| 1 machine || 1 machine || 1 machine
|-
| Facility (overhead)||1 room || 1 room || 1 room || 1 room
|}

The amount of materials and labor that goes into each shirt increases with the number of shirts produced. In this sense, the cost "varies" as production varies. In the long run, if the business planned to make 0 shirts, it would choose to have 0 machines and 0 rooms, but in the short run, even if it produces no shirts it has incurred those costs. Similarly, even if the total cost of producing 1 shirt is greater than the revenue from selling the shirt, the business would produce the shirt anyway if the revenue were greater than the variable cost. If the revenue that it is receiving is greater than its variable cost but less than its total cost, it will continue to operate while accruing an economic loss. If its total revenue is less than its variable cost in the short run, the business should shut down. If revenue is greater than total cost, this firm will have positive economic profit.{{cn|date=November 2023}}