Variable cost refers to expenses that fluctuate based on the level of  production or usage.

For example, if a bakery produces more cakes, the costs for ingredients like  flour, sugar, and packaging will increase, making these variable costs

How to Understand : 

Variable costs rise when production increases and decrease when production falls.

Importance :

Understanding variable costs is essential for businesses to calculate their profits  accurately.

They play a crucial role in making pricing decisions for products.

Variable costs are important for budgeting and managing overall expenses.

They help businesses understand break-even points, indicating when they begin to make  a profit.