What Are the Fixed Costs in a Brewery?

by Sean Keven; Updated September 26, 2017
A brewery's operating mission is to make money.

Fixed costs are those that remain the same regardless of the level of productivity or sales a company generates. All businesses have to balance their financial books based on expenses they know they'll incur (fixed costs), plus expenses needed to get goods to market. A brewery must operate to the minimum break-even level to remain a viable business. This level will be relative to the revenue generated versus the combined fixed and variable costs to run the business.

Payroll Expenses

Paying full-time employees is a fixed cost. Payments to those on the payroll will continue regardless of how much unit volume of a brewery’s beverage is sold to market. Breweries, like any other for-profit business, are responsible for maintaining a staff that adds value to the business. They must ensure they're retaining employees who create greater revenue through their efforts and increase the brewery's profit margin, balancing the value of having higher-paid more experienced personnel with less expensive and skilled personnel.

Utilities

Utilities, such as electricity for lighting and the running of machinery needed to produce a product, are a fixed cost. Any business, including a brewery, must continue to pay the bills, including heating and cooling the workspace, phone and Internet service. Most of these utility costs are on a monthly billing cycle and must be paid to keep the brewery running, regardless of how many beverages are moving out the door.

Space and Maintenance

A brewery needs a place to operate. Physical space in which to carry on business is a resource that can't be quickly changed to keep pace with sales revenue generated and usually entails paying a mortgage or rent. This office and manufacturing space must also be maintained to remain at peak operating efficiency. If equipment that's integral to the production at a brewery needs replacing or fixing, it must be done to remain in business.

Depreciation

According to generally accepted accounting principles, depreciation is an expense that needs to be reflected on a brewery’s financial books and is tracked to measure an asset's financial benefits over the course of its useful life. An example for a brewery may be its fleet of delivery trucks. While originally paid for by the brewery, the depreciation incurred through use and age must be tracked and accounted for as a fixed cost.

About the Author

Sean Keven began writing professionally in 2011. Based in California, Keven has extensive knowledge of world history, military history and sports psychology. He is a graduate of California State University, Chico with a B.A. in journalism and a minor in forensic anthropology.

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