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Definition and Examples of

Variable Cost

Explanation: Variable costs are expenses that change in proportion to the activity of a business. They are typically linked to the production level, such as raw materials and labor costs.

Example: For your custom t-shirt printing business, the costs for materials and printing per shirt are variable costs.

Potential Issues: Failing to accurately predict and manage variable costs can lead to pricing issues and profit margin errors, affecting the overall financial health of the business.

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