The average variable cost formula is AVC = VC(Q). Average variable costs represent a company's variable costs divided by the quantity of products produced in a particular period of time. Variable costs are those that vary or alter based on the amount of product produced.
The time period typically utilized to determine average variable cost is a quarter or three months. Variable costs include such items as labor, electricity and similar elements involved in the production of a firm's products. Determining the total costs of manufacturing a product involves the addition of the average variable costs with average fixed costs.