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What Is a Variable Cost? A Simple Definition for Small Businesses


Quantitative variables are any variables where the data represent amounts (e.g. height, weight, or age). The external validity of a study is the extent to which you can generalize your findings to different groups of people, situations, and measures. Probability sampling means that every member of the target population has a known chance of being included in the sample. The process of turning abstract concepts into measurable variables and indicators is called operationalization. In scientific research, concepts are the abstract ideas or phenomena that are being studied (e.g., educational achievement).

  • With poor face validity, someone reviewing your measure may be left confused about what you’re measuring and why you’re using this method.
  • It is called independent because its value does not depend on and is not affected by the state of any other variable in the experiment.
  • Methods are the specific tools and procedures you use to collect and analyze data (for example, experiments, surveys, and statistical tests).
  • You use this measurement data to check whether and to what extent your independent variable influences the dependent variable by conducting statistical analyses.
  • In multistage sampling, you can use probability or non-probability sampling methods.

It is a tentative answer to your research question that has not yet been tested. For some research projects, you might have to write several hypotheses that address different aspects of your research question. Inductive reasoning is also called inductive logic or bottom-up reasoning. In inductive research, you start by making observations or gathering data. Finally, you make general conclusions that you might incorporate into theories.

Identifying independent vs. dependent variables

Because variable costs scale alongside, every unit of output will theoretically have the same amount of variable costs. Therefore, total variable costs can be calculated by multiplying the total quantity of output by the unit variable cost. The concept of relevant range primarily relates to fixed costs, though variable costs may experience a relevant range of their own. This may hold true for tangible products going into a good as well as labor costs (i.e. it may cost overtime rates if a certain amount of hours are worked). Consider wholesale bulk pricing that prices goods by tiers based on quantity ordered. In general, companies with a high proportion of variable costs relative to fixed costs are considered to be less volatile, as their profits are more dependent on the success of their sales.

  • For example, the number of stores times the number of products sold per store, times the average price per product equals total revenue.
  • A correlation is usually tested for two variables at a time, but you can test correlations between three or more variables.
  • However, in stratified sampling, you select some units of all groups and include them in your sample.
  • Without a control group, it’s harder to be certain that the outcome was caused by the experimental treatment and not by other variables.
  • They are important to consider when studying complex correlational or causal relationships.
  • In this research design, there’s usually a control group and one or more experimental groups.

A business consultant has many variable costs because she does many different types of contracts that incur their own specific expenses. She also has to travel to visit the client and the cab fare is a variable expense. She pays an assistant hourly to help her and this billable labor is also a variable cost.

Sometimes, even if their influence is not of direct interest, independent variables may be included for other reasons, such as to account for their potential confounding effect. Variable costs are directly related to the cost of production of goods or services, while fixed costs do not vary with the level of production. Variable costs are commonly designated as COGS, whereas fixed costs are not usually included in COGS. Fluctuations in sales and production levels can affect variable costs if factors such as sales commissions are included in per-unit production costs.

What is an independent variable?

Scientists and researchers must always adhere to a certain code of conduct when collecting data from others. You can keep data confidential by using aggregate information in your research report, so that you only refer to groups of participants rather than individuals. Every dataset requires different techniques to clean dirty data, but you need to address these issues in a systematic way.

The current variable cost will be higher than before; the average variable cost will remain something in between. You can also manually test this solution by changing the independent variable until you arrive at the solution above. Based on the model, the optimal number of employees (the independent variable) is 10 per store, in order to maximize profit (the dependent variable). At this point, some tests should be performed to ensure the linking is properly set up and the dependent variable changes as expected with changes in the assumptions.

Visualizing independent and dependent variables

Methods are the specific tools and procedures you use to collect and analyze data (for example, experiments, surveys, and statistical tests). Methodology refers to the overarching strategy and rationale of your research project. It involves studying the methods used in your field and the theories or principles behind them, in order to develop an approach that matches your objectives. Sampling means selecting the group that you will actually collect data from in your research. For example, if you are researching the opinions of students in your university, you could survey a sample of 100 students.

This means that each unit has an equal chance (i.e., equal probability) of being included in the sample. Unlike probability sampling (which involves some form of random selection), the initial individuals selected to be studied are the ones who recruit new participants. You could also choose to look at the effect of exercise levels as well as diet, or even accounting principles quiz and test the additional effect of the two combined. Determining cause and effect is one of the most important parts of scientific research. It’s essential to know which is the cause – the independent variable – and which is the effect – the dependent variable. Independent and dependent variables are generally used in experimental and quasi-experimental research.

Independent Variable Examples

Fixed costs are expenses that remain the same regardless of production output. Whether a firm makes sales or not, it must pay its fixed costs, as these costs are independent of output. Therefore, a company can use average variable costing to analyze the most efficient point of manufacturing by calculating when to shut down production in the short-term. A company may also use this information to shut down a plan if it determines its AVC is higher than its.

Sometimes the dependent variable is called the “responding variable.” The independent variable is the condition that you change in an experiment. It is called independent because its value does not depend on and is not affected by the state of any other variable in the experiment. Sometimes you may hear this variable called the “controlled variable” because it is the one that is changed.

Frequently asked questions about independent and dependent variables

In restriction, you restrict your sample by only including certain subjects that have the same values of potential confounding variables. Once divided, each subgroup is randomly sampled using another probability sampling method. In experimental research, random assignment is a way of placing participants from your sample into different groups using randomization. With this method, every member of the sample has a known or equal chance of being placed in a control group or an experimental group.

In addition, variable costs are necessary to determine sale targets for a specific profit target. When the manufacturing line turns on equipment and ramps up product, it begins to consume energy. When its time to wrap up product and shut everything down, utilities are often no longer consumed. As a company strives to produce more output, it is likely this additional effort will require additional power or energy, resulting in increased variable utility costs. Along the manufacturing process, there are specific items that are usually variable costs. For the examples of these variable costs below, consider the manufacturing and distribution processes for a major athletic apparel producer.

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