Raw materials, freight, payment processing fees, sales commissions: costs incurred per unit sold, which rise and fall with activity.
Revenue less variable costs is contribution margin, the amount each incremental sale contributes toward covering fixed costs and then toward profit. It is the single most useful margin for operational decisions.
A business with mostly variable costs has low operating leverage: profit tracks revenue closely, margins are stable, and downturns are survivable but upturns are unspectacular.
The classification is often less clean than a textbook suggests. Labour is variable in a business that flexes shifts and fixed in one with permanent contracts, which is itself a meaningful difference between two apparently similar companies.
Worked example
A product sells for 50 with 30 of variable cost, so contribution margin is 20, or 40%.
Fixed costs of 500,000 mean break even is 25,000 units. Every unit beyond that adds 20 straight to profit.
Contribution margin, not gross margin, is what answers whether an incremental order is worth taking.