Section 5: Variable costs

These costs are not associated with generating revenue seen in the cost of sales but do vary based on changes in sales or output.

Examples include:

  • Commission payments
  • Marketing / advertising
  • Utilities

These costs can have an indirect way of driving sales.

Examples:

  • Marketing costs should have an impact on the sales for the business at this period.
  • You may offer commission payments to help drive performance, you would expect this to increase in line with sales.

ACTIVITY: List a mixture of examples of costs and user has to decide what is fixed or variable.

Cost

Fixed or Variable

Rent

Fixed

Stationery

Variable

Electricity

Variable

Manager salary

Fixed

Bank charges

Variable

Laser repairs

Variable

Service charge

Fixed

Audit fee

Fixed