Variable
Expenses are those expenses that are directly linked to the volume of
business that you conduct. A good example here is consumables. If you do not sell any hours then consumables will be
zero, as soon as you begin to sell hours then consumables build accordingly.
Typically,
Variable Expenses are shown as a monetary value and in order for you to
capture meaningful trend analysis you will need to express them as a
percentage of departmental Turnover.
Example:
A) Variable Expenses = R18,570 B) Total Turnover = R371,388 C) Variable Expense % = 5% (A ÷ B X 100)
Discussion:
The
term "Variable" does not mean that an expense varies by value, nor does
it mean that it may change in some way. It simply means that this type
of expense grows with the level of business that you conduct.
In
order to gain full control over your Departmental Expenses you really
need to understand the difference between Variable and Semi-fixed
Expenses and have them properly separated on your financial reports.