A cost that varies in total direct proportion to changes in activity is a variable cost. Because total cost varies in direct proportion to activity changes, a variety cost is a constant amount per unit. Relative to activity volume of units of output or number of customers serviced, the examples of variable costs include the costs of materials, hourly wages, and sales commisions. Variable costs are extremely important to the company's total profit picture because every time a product is produced or sold or a service is rendered, a corresponding amount of variable cost is incurred.
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