Glossary
Variable cost
A variable cost rises and falls with how much you sell, such as the goods themselves, packaging and sales commission.
What it means for a shop owner
If you sell nothing you pay none of it. Subtract it from the selling price to see what each sale contributes toward the fixed costs. That gap is the base of the break-even calculation.
A worked example
You sell a piece at 10 and it costs 6 with packaging. Each sale contributes 4, and to cover 1,000 of rent you need 250 pieces.
Related
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