Variable cost

Variable costs are expenses that change in direct proportion to the level of production or sales volume of a company. These costs vary as the company’s production or sales activity changes.

As the level of production increases, variable costs increase, and as production decreases, variable costs decrease. Variable costs are tied to the company’s output or activity level, meaning they fluctuate based on the number of units produced or sold.

Variable costs are expenses that change in direct proportion to the level of production or sales volume of a company
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Examples of variable costs include:

Direct Materials: The cost of raw materials used in the production of goods. As more units are produced, the cost of direct materials increases.

Direct Labor: Wages and salaries paid to workers directly involved in the production process. The more units produced, the higher the direct labor cost.

Variable Overhead: Other production-related costs that vary with the level of activity, such as electricity, water usage, and certain maintenance expenses.

Sales Commissions: Commissions paid to salespeople based on their sales performance. As sales increase, the commission expenses also increase.

Packaging and Shipping Costs: Costs associated with packaging products and shipping them to customers. These costs increase with higher sales volume.

Raw Material Transportation: Costs associated with transporting raw materials to the production facility. As production increases, so do transportation costs.

Utilities: Variable costs such as electricity and gas used in the production process or for lighting and heating facilities.

Sales Discounts: Discounts offered to customers to encourage higher sales. The cost of these discounts increases with increased sales.

Variable costs are contrasted with fixed costs, which remain constant regardless of the production or sales volume. Fixed costs include expenses like rent, insurance, salaries of non-production employees, and depreciation.

Analyzing variable costs is essential for businesses to understand their cost structure, determine the breakeven point, and make informed decisions about pricing and production levels. By distinguishing between variable and fixed costs, companies can better understand their cost behavior and plan their operations to maximize profitability.



Infrastructure Challenges: Tanzania faces significant challenges in terms of infrastructure development, including inadequate transportation networks, unreliable power supply, and limited access to water and sanitation facilities. These infrastructure deficiencies hinder the growth and competitiveness of the manufacturing industry.

Limited Access to Finance: Many manufacturing firms in Tanzania struggle to access affordable and long-term financing options. This limits their ability to invest in modern technology, expand production capacity, and innovate. The lack of financial support constrains the growth and modernization of the manufacturing sector.

Inadequate Skilled Workforce: The manufacturing industry requires a skilled workforce with technical expertise. However, Tanzania faces a shortage of adequately trained and skilled workers in various areas, including engineering, machine operation, and quality control. The lack of skilled labor inhibits the productivity and efficiency of manufacturing firms.

Inconsistent Policy Environment: Frequent policy changes, unclear regulations, and inconsistent enforcement of laws pose challenges for the manufacturing industry in Tanzania. Uncertainty and lack of stability in the policy environment make it difficult for firms to plan and make long-term investments.

Import Competition: The manufacturing industry in Tanzania faces stiff competition from imported products, especially from countries with more advanced manufacturing sectors. Imported goods often have cost advantages and better quality, making it challenging for domestic manufacturers to compete effectively.

Limited Access to Market Information: Many small and medium-sized manufacturing firms in Tanzania lack access to market information, which hinders their ability to identify market opportunities, understand consumer demand, and effectively target their products. Limited market information limits their competitiveness and growth potential.

Inadequate Technology and Innovation: The adoption and utilization of advanced technology and innovation are crucial for the competitiveness of the manufacturing sector. However, many firms in Tanzania lack access to modern technology, research and development facilities, and innovation support systems. This hampers their ability to improve product quality, develop new products, and enhance efficiency.

Inefficient Regulatory Processes: Cumbersome bureaucratic procedures, lengthy approval processes, and burdensome regulations increase the cost of doing business in the manufacturing sector. Such inefficiencies create barriers for firms, especially small and medium-sized enterprises, and discourage investments and entrepreneurship.

Addressing these challenges requires a comprehensive approach that includes improving infrastructure, promoting access to finance, enhancing skills development, providing policy stability, supporting market information dissemination, fostering technology transfer and innovation, and streamlining regulatory processes. By addressing these issues, Tanzania can create a conducive environment for the development of its manufacturing industry.



The level of economic development of North America is very high compared to that of East Africa and other third world countries. In U.S.A the rural agricultural population is only 3% of the total population while that of Canada is 6%. In East Africa, the rural agricultural population is 90% of the total population.

There are several factors to explain this.

Unlike East Africa, North America has had along period of stability and a conducive environment for development. More over the major world wars never affected the region because they were not fought on the American land.

The climatic conditions prevailing there favour the activities of agriculture. The levels of agricultural activities are high and mechanized hence 6% of the Canada’s population produce enough food for the rest of the population. This is because during agricultural revolution there was land consolidation and many small-scale farmers were forced into bankruptcy and these sold off their plots of land to big entrepreneurs.

In terms of minerals, North America is very rich in high quality of minerals. These minerals range from Iron ore, Coal, petroleum, Aluminium, Copper etc. As a result of mineral wealth, industrial revolution took off rapidly and industries include air craft, air space, automobile, machinery, electronics and many others.

In terms of soils, North America has fertile soils especially in the Canadian and United State plains. This was due to glaciations which resulted into glacial moraines and these moraines are very fertile and good for agriculture.

North America is well endowed with a variety of forest resources especially the coniferous forest that occur in pure stand making the exploitation of forestry resources very easy.
The rocky mountain region
The Canadian shield
The coastal plain
The central low land
The Appalachian mt.

North America has abundant water resources in the region because of numerous large oceans, lakes, rivers that are used for water resource – development.




  • One who buys goods in bulk and sells them in bulk.
  • Warehousing goods
  • Risk bearing
  • Keeping prices stable
  • Breaking the Bulk
  • providing a variety
  • Information
  • The Financier
  • Transport
  • Preparing goods for sale
  • Marketing


  • It is wholesale that sells goods strictly on cash basis
  • deal mainly in groceries
  • Goods sold do not require self service
  • Stocks a variety of goods
  • Goods sold are displayed on shelves
  • Operates from large buildings
  • Sells goods by use of self service
  • may sell goods to both retailers and consumers


  • Low market for domestic industrial goods due to competition with high quality and low priced goods from developed countries like Britain, Japan and U.S.A.
  • Inadequate capital for investment in establishing and managing industries.
  • Shortage of skilled labour force to work in industries like Technicians and Engineers.
  • Political instabilities especially in Uganda which led to closure of some industries e.g. Gulu foam for making mattresses.
  • Poor transport facilities which hinder quick transportation of raw materials and manufactured goods.
  • Irregular electricity supply to run industries due to frequent load shedding which brings activities to a standstill.

  • Unfavourable government policies which discourage industrial development e.g. heavy taxes imposed on industries.
  • East Africa lacks some raw materials for heavy industries which leads to dependence on importation e.g. iron ore and petroleum.
  • Most industries are owned by foreigners who don’t re-invest their profits within East Africa leading to slow growth of industries.