The Variable Cost Ratio (VCR) is a key business metric that helps measure efficiency and cost-effectiveness. It measures the proportion of total costs that are variable, meaning they can change with changes in production or sales volume. By analyzing the VCR, businesses can identify opportunities to lower their costs, improve their margins, and ultimately increase their profits. An easy way to think about the VCR is that it measures how much money you’re spending for every new sale or item produced. The higher your VCR ratio is, the less efficient your business is.