Answer to Question #172387 in Microeconomics for Alex

Question

What are examples of fixed and variable costs in a fast food restaurant? How do you think a firm will be able to maximize their profits if the economy starts to go into a recession?

Answer 1

Variable costs are costs that change (proportionally, degressively or progressively) due to fluctuations in the volume of trade.Variable costs include:

food cost

interest on loans and borrowings

transportation costs of raw materials and goods

expenses for storage, part-time work, sorting and packing of goods

fuel, gas and electricity costs for production needs

advertising costs

loss of goods and products during transportation, storage and sale

packaging costs

piecework extra work, bonus payments if they depend on the volume of sales

part of deductions for social needs

part of other expenses (collection for the collection of trade proceeds, expenses for maintaining a cash register, the cost of disposable tableware, etc.)

 Fixed costs are costs that remain relatively constant over time and do not change due to fluctuations in turnover. Fixed costs exist even if the catering establishment is not working for some reason. Fixed costs include:

salaries of employees according to official salaries and tariff rates

expenses for the purchase of food and beverages

rent

expenses for rent and maintenance of premises and equipment, utility bills

depreciation of fixed assets

overhaul and maintenance costs

wear and tear of sanitary clothes, table linen, low-value and quick-wear items, tableware and cutlery

part of deductions for social needs

taxes

AXO and fuels and lubricants expenses

 Based on the assumption that every capitalist seeks to maximize profits, special measures are taken to expand the scope of limited demand: various forms of credit, discounts, bonuses, etc. are offered.