Variable Costs Are Changeable

Total variable costs are those costs that do change or vary when you produce and services. They include such things as labor-time and materials.

Unlike fixed costs, if you build a Widget plant and you produce nothing, you won't buy any labor-time and materials, so you will have zero variable costs. If you were to produce ten widgets, you would buy a certain amount of labor-time and materials, so you would then have some variable costs. If you were to produce more widgets, you would purchase more labor-time and materials, so you would have more variable costs. As output either increases or decreases (varies), you use more or less labor-time and materials. That is how we get the expression "variable costs