Variable costs (SAP Business One)

Variable costs are cost components that change with the degree of utilisation or production volume. They are only incurred when services are created or products are produced.

Detailed explanation/description:

Variable costs are part of a company's total costs and change depending on the output quantity. Typical examples are material costs or performance-related wages. The reaction of variable costs to changes in employment is described by the degree of responsiveness (R):

Proportional costs (R = 1): Costs increase in the same proportion as employment, e.g. material costs at a constant price.
Degressive costs (0 < R < 1): Costs rise more slowly than employment, e.g. through volume discounts.
Progressive costs (R > 1): Costs rise disproportionately, e.g. when machines or energy are overutilised.

In practice, the following frequently occur Mixed costs which contain fixed and variable components. These must be separated using mathematical methods (e.g. regression analysis).

The distinction between fixed and variable costs is fundamental to the Partial cost accounting. Only the variable costs are allocated to individual products. The fixed costs are considered as a block and recognised separately in the operating result - in accordance with the causation principle.

A central area of application is the Contribution margin accounting. The contribution margin results from the difference between revenue and variable costs. Variable costs define the short-term price floor.

Direct coststhat can be directly allocated to a product are usually variable costs. Overheads can be both fixed and variable, as they cannot be directly allocated to a cost unit.

The measurement of consumption can be based on various approaches, e.g. replacement values, planned prices or historical acquisition costs.

The categorisation into fixed and variable costs can depend on the level under consideration and the time period. Energy costs can be variable in production, for example, but fixed in administration. Companies use measures such as Outsourcingin order to variabilise fixed costs - while shifting the risk.

In SAP Business One, variable costs play an important role in the Flexible standard costing and Contribution margin analysisespecially in planning, cost control and decision-making.

Versino Financial Suite

the Versino Financial Suite for SAP Business One improves the management of variable costs through automated posting texts, enhanced reports and a clear financial cockpit. It increases efficiency, transparency and traceability without changing basic cost accounting.