Financial Control in Hospitality

VARIABLE COSTS:
variable costs are costs that vary with output;
generally variable costs increase at a constant rate relative to labor and capital;
variable costs may include:
wages;
utilities;
materials used in production;
etc.;

DIRECT COSTS:
an expense that can be traced directly to (or identified with) a specific cost center or cost object such as a department, process, or product;
direct costs vary with the rate of output but are uniform for each unit of production, and are usually under the control and responsibility of the department manager;
as a general rule, most costs are fixed in the short run and variable in the long run;
also called direct expense, on cost, variable cost, or variable expense, they are grouped under variable costs.

DIRECT COSTS INCLUDE:
personnel costs;
consultants;
equipment;
materials & Supplies;
travel;
Subcontracts;
fuel;
power;

INDERECT COSTS:
An expense (such as for advertising, computing, maintenance, security, supervision) incurred in joint usage and, therefore, difficult to assign to or identify with a specific cost object or cost center (department, function, program). Indirect costs are usually constant for a wide range of output, and are grouped under fixed costs.


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