A flower shop is a place where flowers are retailed. Flower shops basically retail cut flowers, floral arrangements, potted plants and artificial flowers. The market for both fresh and artificial flowers has continued to soar from generation to generation because we still have weddings, burials and other special events taking place all around us.
Fact remains that as insignificant as most people think flower is, it is still a major requirement for weddings, love gathering and even worship centers.
What is Variable Cost?
Variable costs are the sum of marginal costs over all units produced. They can also be considered normal costs. Fixed costs and variable costs make up the two components of total cost. Please note that variable costs are sometimes called unit-level costs as they vary with the number of units produced.
It is important to point out that the level of variable cost is influenced by many factors, such as fixed cost, duration of project, uncertainty and discount rate. An analytical formula of variable cost as a function of these factors has been derived. It can be used to assess how different factors impact variable cost and total return in an investment.
With a brief explanation of what a flower shop does and what variable cost is all about, we can explain some of the variable costs associated with running a flower shop and they are;
Variable Costs of Running a Flower Shop
1. The Cost of Shipping/Transporting Your Flowers, Flower Pots, Vases and Accessories
When we talk about the variable costs associated with running a flower shop, one of the costs that readily comes to mind is the cost of shipping or transporting the flowers, flower pots, vases and decoration accessories from the manufacturers and cultivators right through to your shop.
As expected, the cost of shipping or transporting will vary because it is solely dependent on the quantity of flowers and accessories that will be ordered.
For example, the cost of shipping a truck load of flowers and accessories from the manufacturer’s warehouse to your store is $250 and the cost of shipping two truck load of flowers and accessories is $500. You can see that the cost of shipping or transportation varies and it is dependent on the quantity to be transported or shipped.
2. The Cost for Packaging Materials/Shopping Bags
Another variable cost that is associated with running a flower shop is the cost of purchasing, branding packaging material or shopping bags.
The truth is that if you order for more goods (cut flowers, floral arrangements, potted plants and artificial flowers, flower pots, vases and other decoration accessories), then you must be ready to spend more to purchase and brand packaging materials or shopping bags.
For example, if you want to print or purchase 1,200 units of branded shopping bags and packaging materials, it will cost you about $120 and if you want to print or purchase 2,400 units, it will cost you about $240. You can see that the cost varies because it is dependent on the number of quantities purchased.
3. The Cost of Construction of Shelves, Display Spaces and Storage Facility
Although this is kind of technical, but we are not ruling out the fact that if a small flower shop doesn’t have a enough space within their shop and they also do not have a storage facility of their own, and they decide to order more goods than their space may cover, then they would need to spend extra on storing these goods in a paid storage facility or construct more shelves and display spaces within their store facility.
This can be termed variable cost simply because if they did not purchase more goods, there won’t be need to spend extra amount on this “variable” factor.
As a matter of fact, the amount they are expected to spend on this variable cost will be dependent on the space they intend occupying on the storage facility. This is so because most storage facility operators charge per storage space occupied.
For example, if the goods you want to store will occupy a 4 by 4 meter space, you will be paying $16 per day and if the goods to be stored will occupy a 5 by 5 meter space, you will be expected to spend $20 per day. You can see that the cost varies depending on quantity and time.
4. Cost of Goods
Lastly, depending on the state of the economy and the price fluctuation of your supplies, the cost of the goods (cut flowers, floral arrangements, potted plants and artificial flowers, flower pots, vases and other decoration accessories) that are retailed in a flower shop can be considered to be variable cost.
This is because if the economy is not stable, the cost of these items will vary from time to time hence they should be classified as variable cost because it is not a fixed cost.
Factors such as climatic condition, availability of raw materials and labor et al can greatly influence the overall cost of producing goods. Please note that variable costs are those that rise and fall with the production volume. Typically found in cost of goods sold, it does not always include everything in COGS.
The above are the basic variable cost associated with running a flower shop, but you must have it in mind that if you intend maximizing profits from your flower shop, then you must make sure you know the amount of your budget that should be assigned to your variable cost and the amount to be assigned to your fixed cost and of course know when to make the necessary adjustment when the need arises.