Variable
Variable Rates change depending on activity
A Variable component calculates a rate that depends on a some amount of activity. For example this could be used to calculate training costs which vary according to the number of employees undertaking training.
There are two inputs required for a variable rate:
The Variable Rate per Activity
The Activity (or factor)
These inputs result in a single value which is the product of the Variable Cost multiplied by the Activity factor.
Example
To calculate the annual head office training costs we provide the cost per person the the number of people who will participate in the training. For the first three periods the number of people is training is 8 people, and given the training cost per person is $625.00 per year the total cost per period is $5,000.
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