Variable Costs

Costs that change in proportion to how much you produce or sell, raw materials, packaging, shipping, payment processing fees.

Understanding variable costs is essential for pricing. Every product sold should cover its variable costs plus contribute to fixed costs and profit.

Each product you sell costs: £4 materials, £1.50 packaging, £3.50 postage, £0.80 payment fees. Variable cost per unit = £9.80. If you sell for £25, each sale contributes £15.20 to fixed costs and profit.