Non-linear variable cost
A non-linear variable cost changes with activity but not at a constant amount per additional unit over the range analysed. Discounts, congestion, learning or inefficiency can create curved relationships. A straight-line approximation may be useful over a narrow range but can mislead outside it. Separate quantity effects from price and process changes and state the evidence behind any forecast rather than assume every cost that varies is proportional.
Worked example
Energy cost per unit rises when machines run at inefficient overload levels, so doubling output may more than double energy cost.
Common mistake
Variable does not universally mean one constant rate, and a curve fitted to past data need not continue indefinitely.
Where it appears in your exams
| Qualification | Exam | Relationship | Period |
|---|---|---|---|
| ACCA | MA | Direct | September 2026–June 2027 |
| FIA | FMA | Direct | September 2026–June 2027 |
