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Control of Fixed Cost & Variable Cost

vijaya kumar n (JOB) (488 Points)

30 October 2010

Hi,

Can anybody suggest me How to control the Variable Costs and Fixed Costs in the Hotel & Restaurant Business????

Awaiting for your valuable replies....

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Yogesh Shah (Managing Corporate Finance) (1051 Points)
Replied 30 October 2010

Hi Vijaya,

As far as Fixed Costs are concerned, they are fixed in nature irrespective of what is your activity level is e.g. rent (if any), annual maintenance charges, license fees (if any) etc. Whereas variable costs you can control.

Some of the important variable expenses in Hotel would be purchase of food items, beverages, drinks etc. You can control all these by effectively using them and by avoiding spoilage / pilferage. Other variable expenses would be electricity charges. You can control them by using equipments having ‘Energy Star’.

As far as salary is concerned, there are two possibilities, if Hotel has permanent staff then Salary is fixed and you can’t control it. But if contract workers are appointed, then you can control Salary. In boom season appoint such workers with less salary and in off season, terminate contract.