1. Choose a real or made up example of a company, and describe at least three variable costs the company has
Let's consider a real example of a company, Starbucks. Here are three variable costs that Starbucks incurs:
1. Coffee Beans: One of the main products that Starbucks offers is coffee. The cost of coffee beans is a significant variable cost for the company. As the quantity of coffee beans required fluctuates based on customer demand, this cost varies accordingly. If the demand for coffee increases, Starbucks will need to purchase more coffee beans, leading to higher variable costs.
2. Milk and Dairy Products: Another variable cost for Starbucks is milk and other dairy products used in their beverages such as lattes and cappuccinos. The quantity of milk consumed varies according to the number of these beverages sold. Higher sales mean increased usage of milk, resulting in higher variable costs.
3. Disposable Cups and Packaging: Starbucks provides its products in disposable cups and packaging, which are also variable costs. As the number of beverages sold increases, the company needs to procure more cups and packaging materials, leading to an increase in variable costs. Similarly, if there is a seasonal promotion requiring special cups or designs, the variable cost of disposable cups may rise.
To find variable costs for a company, it's essential to analyze the cost structure and identify expenses that fluctuate based on changes in production or sales levels. Variable costs are typically associated with the direct production or provision of goods and services.
You need to decide on a company first.
Sra