Understanding Costs in Hospitality

What are fixed costs in the hospitality industry?

• Costs that change with the level of production

• Costs that remain constant regardless of production levels

• Costs that vary with the number of guests

• Costs that are incurred only during peak seasons

Which of the following is an example of a variable cost?

• Rent for the building

• Salaries of permanent staff

• Cost of food supplies

• Insurance premiums

What are mixed costs?

• Costs that are entirely fixed

• Costs that are entirely variable

• Costs that have both fixed and variable components

• Costs that are unpredictable

Step costs are best described as:

• Costs that increase in small, continuous increments

• Costs that remain constant over a range of activity, then jump to a higher level

• Costs that decrease as production increases

• Costs that are incurred only once

Direct costs in the hospitality industry refer to:

• Costs that are not directly traceable to a specific service

• Costs that can be directly traced to a specific service or product

• Costs that are shared among different departments

• Costs that are fixed

Indirect costs are also known as:

• Fixed costs

• Variable costs

• Overhead costs

• Direct costs

What are controllable costs?

• Costs that cannot be influenced by management

• Costs that can be influenced or changed by management decisions

• Costs that are fixed and unchangeable

• Costs that are variable and unpredictable

Non-controllable costs are:

• Costs that can be adjusted by management

• Costs that are beyond the control of management

• Costs that are always variable

• Costs that are always fixed

Incremental costs refer to:

• Costs that remain constant regardless of production levels

• Additional costs incurred when producing one more unit of a product

• Costs that decrease as production increases

• Costs that are shared among different departments

Sunk costs are:

• Costs that can be recovered

• Costs that have already been incurred and cannot be recovered

• Costs that are variable

• Costs that are fixed