Identify the total costs that change with production or sales volume
Separate fixed costs from costs that vary with output
List direct materials, direct labor, and variable overhead
Determine the cost per unit for each variable expense
Multiply variable cost per unit by the number of units produced or sold
Add all variable expenses together
Use the formula: Variable Cost = Total Cost – Fixed Cost
Use the formula: Variable Cost per Unit = Total Variable Cost ÷ Number of Units
Review past cost data to see which expenses rise or fall with activity
Check invoices, payroll records, and utility bills for variable components