Teen Burgers: A Period Variable Cost

Variable costs are those costs that increase as the output the restaurant increases. As example, assume for the Teen Burger Direct Materials cost $1.50 per burger. A day with one thousand burgers sold would cost of $1500 dollars. In comparison, a day with two thousand burgers sold would cost $3000 dollars. While the cost per Teen Burger remains constant the total cost per day varies with the output each given day. Electricity costs would increase in the same fashion as each time a burger is cooked the usage of electricity for heating would increase. Assuming four cooks can produce 1000 Teen Burgers, five can produce 2000, and six can produce 3000 in a day wages would also increase in the same fashion. If production only moves from 2600 to 2700 burgers the Direct Labour costs will remain fixed, this type behavior, as visible in the chart to the right, is called a step variable (Bragg, 2014). The dotted line is the trend, if we graphed the number of teen burgers to the Cost of Direct materials it would take the same straight line shape. The number of attendees at the register tracks approximate the same number of employees and number of Teen Burger sales, But is a period variable cost. Any cost that goes up as a direct result of an increase in output would
Rent for an A&W in a mall, Rental fees for equipment, and fixed salaries are examples, If Rent is $1,500 a month and 1000 Teen burgers are sold then Rent is $1,500 that month. If instead 2000 Teen Burgers are sold, then Rent is $1,500 that month. What does change is the fixed cost per burger. If we profit $1.00 per Teen Burger, then $1,500 Rent divided by 1000 Teens is $1.50 fixed costs for rent per burger. $1,500 for rent divided by 2000 Teens is $0.75 fixed costs for rent per Teen Burger. Note that in 2.2.1 with Variable costs it was the $1.50 per Teen Burger for ingredients which does not change. The total cost varies as output