Examples of variable costs include raw materials used to create a product, billable wages, sales commissions and utility costs (for example, electricity that increases with production capacity). All together these are often referred to as a company's Cost of Goods Sold, or COGS... Companies can use their COGS to analyze which products or services are most profitable and make informed decisions about whether or not they should continue producing certain items. For instance, if one product is performing much better than another, it might be a good idea to focus on the popular product while discontinuing the less-popular item. This would lower the overall cost of goods sold while increasing profits. However, this is a delicate analysis to conduct and requires careful consideration of other factors like customer preference... On the other hand, variable costs fluctuate in proportion to a company's production level or sales volume, and rise as production increases and fall as production..