What are the benefits of tracking variable costs?

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Variable costs = total costs - fixed costs
But this formula only gives you very superficial numbers and doesn't tell you much. It helps you calculate your Total Variable Cost (TVC ). But that's just the tip of the iceberg. If you're a manufacturing company, you also need to know how to figure out the average variable cost of one unit produced and the entire average variable cost of the total production. Here's the formula to do that:
Average Variable Cost Formula
Average variable cost = Total variable cost of product X + product Y... / Total production volume

Why is it important to know both metrics? Let's see in the next paragraph.
As we've said, fixed costs are a kind of formula: no matter how much you like, you can barely reduce them without experiencing strong opposition from your staff (e.g., lower salaries) or reduced productivity (e.g., renting a smaller warehouse and reducing equipment).
However, a profitable business is premised on revenue exceeding expenses. It is always difficult to raise prices, so companies are always looking for opportunities to cut expenses. To do this, they must first figure out exactly how much money they are spending and where, and then think about how much they can cut without hurting profits.

Let me explain with an example. Imagine a company belize telegram database that makes sneakers. They spend an average of $2.00 on advertising for each pair of shoes they sell. They sell 10,000 pairs per month, or 120,000 pairs per year. That means they spend $20,000 per month advertising sneakers. The advertising team can try to optimize their advertising and advertising strategy to keep their total variable costs at $1.50 per pair. If they are successful, the company in this example can save $60,000 per year. But they can't do that unless they know where they can cut spending and what they can improve. And for the advertising team to achieve these goals, they need to constantly monitor their variable costs to know how much they can cut spending to reach their goals.

overview
Of course, we hope this article was helpful, but to get the most out of it, let's summarise things. So, variable costs are one of the two types of costs that a business faces. Variable costs are usually directly correlated to the size of your business. That is, the greater the scale of your production, sales and activities, the higher your variable costs will be. Calculating variable costs is very easy, just subtract your fixed costs from your total expenditures. And finally, keeping an eye on your variable costs is very beneficial. Your business can save thousands of dollars a year by knowing which areas you can improve.