What is variable amount?

What is variable amount?
Variable amounts are amounts that change frequently. Variable amounts are commonly used by accountants in a manufacturing company. When products are made there are certain things that cost money but can vary. These costs are important to ensure the coverage of overhead. Some example include direct labor, direct materials, and utilities like electricity and water. These are variable as they may change. You may find a cheaper vendor providing the materials at a cheaper rate. Or, the cost of material may go up due to the rise if fuel costs.

The opposite is true of fixed costs. Fixed costs is a set amount of expenses per month. Some examples are rent or insurance premiums. For the most part, these are fixed on a month to month basis. To get the cost per unit of product made the amount is divided by the number of units made. The cost per item made may go down if there is an increase in the amount manufactured. If the amount manufactured decreases then the cost per unit goes up. Overall, the cost paid per month is steady.