Answer to Question #247774 in Macroeconomics for Utkarsh

Question

Assume that you are an entrepreneur of a hotel. What are the fixed and variable costs to be carried out in that business?

Answer 1

The fixed costs are those that remain constant regardless of the quantity of output produced by the firm. They are normally not affected by changes in sales volume or occupant and have a little direct relationship with the volumes produced.

On the other hand, variable costs are those that change with the quantity of output produced. They are directly related to hotel occupancy and even the business volume.

The fixed cost which can be carried out by a hotel business are listed below;

• Loan payments.
• Hotel employee's health premium.
• Rent.
• Telephone plans.
• License charges.
• Advertising cost.
• Insurance.
• Provision
• Salaries and wages.

The variable costs which can be carried out by the hotel are listed below;

• Car repairs.
• Guest room amenities.
• Food.
• Flower and decorations.
• Delivery and transport expenses.
• Laundry operations.
• Sales commission.
• Human resource.
• Hourly wages.
• Management fees.
• Water and electricity utilities.