---
title: "What is variable cost? Ecommerce examples | Product Metrics"
description: "Variable costs rise with every order: product cost, shipping, payment fees, packaging and returns. See a worked example and how they set break-even ROAS."
canonical: "https://www.productmetrics.io/glossary/variable-cost"
pageType: article
language: en
publisher: "Product Metrics"
author: "Berend Vrakking"
datePublished: 2026-10-07
dateModified: 2026-10-07
---

> Content index: https://www.productmetrics.io/llms.txt

# Variable cost

A variable cost is a cost that rises and falls with the number of orders you take, such as product cost, shipping and payment fees.

## Formula

`Variable cost per order = product cost + shipping + payment fees + packaging + returns`

Revenue minus variable costs is contribution margin, and break-even ROAS is 1 ÷ contribution margin %. Fixed costs such as rent and salaries stay out.

## Example

Worked example, one order:

| Item | Amount |
| --- | --- |
| Order value (excl. VAT) | €80.00 |
| Product cost | −€36.00 |
| Shipping | −€6.00 |
| Payment fees (3%) | −€2.40 |
| Packaging | −€1.60 |
| Returns allowance (10% of orders × €20.00 per return) | −€2.00 |
| Total variable cost | €48.00 |
| Contribution margin (€80.00 − €48.00) | €32.00 (40%) |

Variable costs take €48.00 of an €80.00 order. The €32.00 left pays for ads and fixed costs, so break-even ROAS is 1 ÷ 0.40 = 2.5. Illustrative data.

## For one product, and for an account

Variable cost differs from product to product. Take a second product at the same €80.00 price and €36.00 product cost that is heavy to ship (€14.00) and comes back more often (€6.00 returns allowance). Its variable cost is €60.00, its contribution margin 25% and its break-even ROAS 4.0, against 2.5 for the first. Illustrative data.

Average the two and you get a variable cost neither product has. The same ROAS can be a profit on one product and a loss on the other, and only variable costs counted per product let POAS, profit on ad spend, show which products earn their ad spend.

## Common mistake

Counting ad spend as a variable cost and then comparing it with ad spend again. Break-even ROAS and POAS already account for ads, so the margin must come before ad spend or the break-even comes out too high.

## Questions

### What is the difference between variable and fixed costs?

Variable costs change with each order: product cost, shipping, payment fees, packaging and returns. Fixed costs stay the same within a month whatever you sell, such as rent, salaries and software subscriptions with a flat fee.

### Is cost of goods sold a variable cost?

Yes. Each unit you sell adds its product cost. Revenue minus cost of goods sold is gross margin; take off the other variable costs too and you get contribution margin.

### Is ad spend a variable cost?

It moves with sales, but it belongs on the other side of the comparison: break-even ROAS and POAS set profit before ads against ad spend. Subtract ad spend after contribution margin to see profit after ads.

## Keep reading

- [Contribution margin](https://www.productmetrics.io/glossary/contribution-margin): Revenue minus variable costs, the margin that sets break-even ROAS.
- [Gross margin](https://www.productmetrics.io/glossary/gross-margin): The margin after product cost only, before the other variable costs.
- [Cost of goods sold](https://www.productmetrics.io/glossary/cost-of-goods-sold): The first variable cost on every order.
- [Break-even ROAS calculator](https://www.productmetrics.io/break-even-roas-calculator): Find the return each product needs to break even.
- [Markup and margin calculator](https://www.productmetrics.io/margin-calculator): Work out margin, markup and selling price from cost.
- [POAS vs ROAS](https://www.productmetrics.io/blog/poas-vs-roas): Why profit on ad spend counts profit after variable costs.

---

Written by Berend Vrakking, founder of Product Metrics. Last updated 2026-10-07.

HTML version: https://www.productmetrics.io/glossary/variable-cost