Question

After one month of operation, xx Café determined to shorten its business hours and close on weekends. What costs, fixed or variable, should xx Café have considered when it made the decision? Explain in detail.  

Answer 1

xx Café should have considered variable cost while taking the decision to shorten its business hours and close on weekends. This is because the fixed cost (like rent of the building etc.) would remain the same irrespective of whether the Café shortens its business hours or not. It is the variable cost like labor that is paid according to the hours worked or electricity bill that can be reduced by working for less hour, that can be reduced by shortening business hours and closing operations on weekends.