Food cost is an example of what type of cost?

Food cost is an example of what type of cost?

• A. Fixed cost
• B. Variable cost
• C. Sunk cost
• D. Opportunity cost

Answer: (B)

Food cost varies with how much you produce. When you prepare more meals, you need more ingredients, so the total amount spent on food rises in line with volume. The per-meal ingredient cost stays roughly steady, but the overall food cost changes as output changes, marking it as a variable cost. This isn’t a fixed cost (which would stay the same regardless of production), nor a sunk cost (a past, unrecoverable expense), nor an opportunity cost (the value of the next best alternative forgone). Understanding this helps with budgeting and menu pricing since you can anticipate how total food cost shifts as meal volume changes.

Food cost varies with how much you produce. When you prepare more meals, you need more ingredients, so the total amount spent on food rises in line with volume. The per-meal ingredient cost stays roughly steady, but the overall food cost changes as output changes, marking it as a variable cost. This isn’t a fixed cost (which would stay the same regardless of production), nor a sunk cost (a past, unrecoverable expense), nor an opportunity cost (the value of the next best alternative forgone). Understanding this helps with budgeting and menu pricing since you can anticipate how total food cost shifts as meal volume changes.