HTM 2030 Lecture Notes - Lecture 4: Fixed Cost, Variable Cost, The Variable

• School: University of Guelph
• Department: Hospitality and Tourism Management
• Course: HTM 2030
• Professor: William Murray

Document Summary

Higher cost % = > impact on volume. Cost stay the same/ menu prices down increased value proposition. Decreased costs (value)/ menu prices the same drop in volume greater than cost changes. Context and execution are critical to judging the relationship between cost, business volume and profit as either good" or bad": can be contingent on. The willingness (do you want to pay?) and ability (can you pay?) of customers to pay more. The impact of lowering costs of the quality of good, beverages and the service. The c/v/p (cost/volume/profit) relationship is based on two key points: fixed costs exist, regardless of sales volume, it is necessary to generate enough total volume to cover both variable and fixed costs. The basic formula is: sales = variable costs + fixed costs + profit s = vs + fc + p. The core tenets of the relationship: the relationship (%) between variable costs and sales remains relatively constant.