![]() ![]() ![]() If you know where your money is going, you can start to make changes. Track your monthly spending: This is the first step to understanding where your money is going. Now that you know what your variable costs are, it’s time to start thinking about ways to reduce them. That means your annual food costs would be $2400 ($200 x 12 months). Variable Expenses = (Average Monthly Spend) x (Number of Months in the Year)įor example, let’s say you spend an average of $200 on food each month. Now that you know what variable expenses are, how can you calculate how much they’re costing you each month? There’s no one-size-fits-all answer to this question, but here’s a basic variable costs formula to help get you started: But if you have to fly across the country for a visit, your variable costs will go up.Ĭlothing: Do you tend to buy new clothes every season, or do you stick to basics and only buy what you need?Įntertainment: How much do you typically spend on things like movies, concerts, or eating out? Travel: If you’re lucky enough to live close to family or friends, your travel expenses might be low. So what are some variable expenses examples ? Here are just a few:įood: This one is pretty obvious- the amount you spend on food each month will vary based on how much you cook at home and how often you eat out. This is why it’s possible to spend more than you intended in certain areas without even realizing it. ![]() Unless you keep track of your grocery receipts or use a budgeting program, you may not know exactly how much you spend on food each month. Such expenses are hard for most people to track and budget for because they are unpredictable. Variable expenses are those that can change from month to month, depending on things like how often you go out to eat or whether you have a family vacation planned. Let’s dive in! What Are Variable Expenses? In our guide, we’ll take a closer look at what variable expenses are and how you can manage them better. Understanding these costs is important when you’re trying to create a budget or stick to one. The things that come to mind are probably rent or a mortgage, car payments, groceries, and maybe some entertainment expenses.īut there are other costs that can vary depending on what’s going on in your life. ![]() That way, a business will not lose money when each unit of a product is sold.Think about everything you spend your money on in a month. When setting prices, one should ensure that at least the variable expenses are included in the price. The reason is that there are few fixed expenses to be paid for in each month, making it easier to achieve a breakeven sales level. For example, the rent expense for a 30,000 square foot factory remains the same until a new product line is added, after which a new lease must be obtained for the additional amount of square footage needed for the additional equipment.Ī business that has a high proportion of variable expenses can usually generate a profit on a low sales level. Many other expenses, such as rent expense, are fixed within a certain activity range. A business has few truly variable expenses. Other variable expenses are commissions, billable labor, piece rate labor, and credit card fees. For example, the direct materials expense increases as sales increase. A variable expense is a cost that alters in conjunction with some type of activity. ![]()
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