Accounting & finance info

The cost that changes with the change in output of a production is called variable cost.

For Example

Suppose that You have a shoe factory and it takes 10 workers to make 100 pairs of shoes per day. Now you want to make 200 pairs of shoes per day, then you need 15 workers.

If per labour wage =&10

To make 100 pairs of shoes= 10 ×$10=$100 wages.

When production increases from 100 to 200, labour also increases 10 to 15.

Wages = 15 ×$10= $150

When production increases, labour cost also increases.

So,here wages variable cost.

𝐒𝐭𝐞𝐩𝐬 𝐭𝐨 𝐤𝐞𝐞𝐩 𝐢𝐧 𝐦𝐢𝐧𝐝 𝐛𝐞𝐟𝐨𝐫𝐞 𝐣𝐨𝐮𝐫𝐧𝐚𝐥𝐢𝐳𝐢𝐧𝐠 𝐭𝐡𝐞 𝐭𝐫𝐚𝐧𝐬𝐚𝐜𝐭𝐢𝐨𝐧𝐬:

1. Which are the two aspects of transactions?
2. Which accounts are concerned?
3. Concerned accounts belong to which category?
4. Which rule of 'debit and credit' is applicable?

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