Definition
Expenses that fluctuate depending on the level of business activity.
Example
A clothing store spends $10,000 on inventory during peak seasons like Black Friday and Christmas but reduces orders to $3,000 during slower months. These costs change based on demand, allowing the store to manage cash flow and avoid excess inventory.
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- Learn more about Variable Costs and other costs in this Beginner's guide How to Create an Operating Budget for Your Small Business