Variable cost in a business varies with production and sales. Some of the important variable costs that affect the purchasing decision of restaurant are food and beverages cost, labor cost, advertising cost, transportation cost and the maintenance cost.
Among these variables the cost of food and beverages is the most important expense. The profit margin of the restaurant can vary to a great extent if the food prices fluctuate (Thompson, n.d.). In menu the price of food cannot be changed every time when the price of food changes. Labor expense is also a variable cost and can be managed through the number of shifts assigned. This may also vary seasonally when the restaurants arrange holiday parties.
Advertising is very essential for promotion of restaurant and can be done through internet, radio, television and magazines. It is variable and include in annual budget allocation to encounter the changing needs of business (Lohrey, n.d.). In the start of business advertising cost is more for promotion purpose and when the business becomes established it may decrease. In restaurant case it may also vary in different seasons like they need more to advertise during Christmas season or during the coming holidays about their attractive menus to gain customer attention.
Maintenance cost in this case is variable in a manner that often there comes an unforeseen requirement due to the breakage of equipment (Thompson, n.d.), like dishes, pans and glass items. Decoration items also come under this category and usually purchased in bulk to minimize expense. It may also include a repairing cost of certain items.
Transportation cost can vary with the fluctuation in fuel prices, particularly in this case the restaurant manager has to keep it in mind because they need raw materials for making food items on daily basis and it also includes a transportation cost.