Variable costs are costs that fluctuate in direct proportion to the volume of units produced.

BplansGlossary

At Bplans, it's our goal to make it easy for you to start and run your business. Our glossary of common business terms will help you learn about key small business and entrepreneurship topics.

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What Is Variable Cost?

Variable costs are costs that fluctuate in direct proportion to the volume of units produced. The best and most obvious example are physical costs of goods sold, direct costs, such as materials, products purchased for resale, production costs and overhead, etc. The concept of variable cost is an important component of risk in a company,... Read more »

planning

What Are Channel Conflicts?

Channel conflicts refers to a situation where one or more channel members believe another channel member is engaged in behavior that is preventing it from achieving its goals. Channel conflict most often relates to pricing issues.   Read more »

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What Does Plant and Equipment Mean?

Plant and equipment is the same as long-term, fixed, or capital assets. These are generally assets that are depreciated over terms of more than five years, and are likely to last that long, too. Read more »

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What Are Obligations Incurred?

Obligations incurred are business costs or expenses that need to be paid, but wait for a time as accounts payable (in other words, bills to be paid as part of the normal course of business) instead of being paid immediately. For more on the subject, see our article on the LivePlan blog: What Is Accounts... Read more »

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What Is Break-Even Point?

Break-even point is output of the standard break-even analysis. The unit sales volumes or actual sales amounts that a company needs to equal its running expense rate and not lose or make money in a given month. The formula for break-even point in units is: The formula for break-even point in sales amount is: =... Read more »

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What Is Cost of Sales?

Cost of sales refers to the costs associated with producing the sales. In a standard manufacturing or distribution company, this is about the same as the cost of the goods sold. In a services company, this is more likely to be personnel costs for people delivering the service, or subcontracting costs. This term is commonly... Read more »

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What Is Product Line Pricing?

Product line pricing refers to setting of prices for all items in a product line involving the lowest-priced product price, the highest price product, and price differentials for all other products in the line. Read more »

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What Is a Long-Term Interest Rate?

Long-term interest rate is the interest rate charged on long-term debt. Read more »

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What Are Collection Days?

Collection days is supposed to represent the average number of days business waits, on average, between delivering an invoice and receiving payment. The formula for calculating collection days is: =(Accounts_receivable_balance*360)/(Sales_on_credit*12) Read more »

planning

What Is a Brand?

Your company’s brand includes your business name, logo, sign, symbol, design, or a combination of all used to differentiate your goods or services from competitors. See our complete guide to small business branding for more on how to build your brand. Read more »

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What Is Co-Branding?

Co-branding is the pairing of two manufacturer’s brand names on a single product or service. For more on branding, see our Branding Guide. Read more »

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What Does Privately Owned Mean?

A company whose shares are not publicly traded on a stock market. Such companies usually have less restrictive reporting requirements than publicly traded companies. A company which is not owned by the government (state owned). In contrast, see the entry for a publicly traded company. Our complete guide to choosing your business structure is good... Read more »

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What Is Senior Corps of Retired Executives (SCORE)?

SCORE is a no-cost consulting and resources service offered through the Small Business Administration. Read more »

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What Is the Corridor Principle?

The corridor principle is the principle where an entrepreneurial venture may find that it has significantly changed its focus from the initial concept of the venture as it has continually responded and adapted to its market and the desire to optimize profitability potential. For more on defining your market and target customers, check out How... Read more »

planning

What Are User Registrations?

In online marketing, user registrations is a conversion value measuring the number of website visitors who voluntarily include themselves in your database in order to access the content you provide on your website. Read more »

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What Is Integrated Marketing Communications?

Integrated marketing communications is the practice of blending different elements of the communication mix in mutually reinforcing ways. Check out our article on the outline for a marketing plan to help you think through your marketing efforts. Read more »

planning

What Is a Market?

A market refers to prospective buyers, individuals or organizations, willing and able to purchase the organization’s potential offering. To learn more, check out How to Do Market Research and How to Define Your Target Market. Read more »

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What Are Earnings?

Also called income or profits, earnings are the famous “bottom line”: sales less costs of sales and expenses. For more, check out our article on the LivePlan blog on net profit, as well as our free Profit and Loss Template. Read more »

planning

What Are Switching Costs?

Switching costs are the costs incurred in changing from one provider of a product or service to another. Switching costs may be tangible or intangible costs incurred due to the change of this source. Read more »

planning

What Is Perceived Risk?

Perceived risk is the extent to which a customer or client is uncertain about the consequences of an action, often relating to purchase decisions.   Read more »

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Variable costs are costs that fluctuate in direct proportion to the volume of units produced.