COSTS COSTS are the money that a business has to pay out to keep the business running. Buying stock Paying Wages Telephone bills Rent

Click the boxes – Once for ‘Yes’, twice for ‘No’ TYPES OF COST Click the boxes – Once for ‘Yes’, twice for ‘No’ Changes with number made Rent per month Wages per month Bank loan per month Advertising per month Insurance per month Raw material per item made Check answers No Yes No Yes No Yes Yes No Yes No Yes No No Yes

Click the boxes – Once for ‘Fixed’, twice for ‘Variable’ TYPES OF COST Click the boxes – Once for ‘Fixed’, twice for ‘Variable’ Fixed / Variable Rent per month No Wages per month Bank loan per month Advertising per month Insurance per month Raw material per item made Yes Check answers Fixed Variable Variable Fixed Variable Fixed Fixed Variable Fixed Variable Fixed Variable Variable Fixed

Does not change with the number being made or sold A FIXED COST Does not change with the number being made or sold This does not mean that fixed costs can never change… e.g. your landlord may put your rent up the local council might put up the business rates the bank may put up the interest on your bank loan

Varies with the number being produced or sold A VARIABLE COST Varies with the number being produced or sold Usual example is the raw material cost of what is being made.. e.g. a sandwich bar would have bread, butter, cheese, tuna, mayo, etc as variable costs because the cost of these things will be different depending on the number of sandwiches being sold….the more sandwiches sold the more bread the sandwich bar will have to buy.

Toys made each month 1 2 3 4 5 Fixed Cost £ Variable cost £ Jane makes soft toys in her spare time… …a very small business. Jane’s Costs: Bank Loan repayment £50 per month Materials £5 per toy Toys made each month 1 2 3 4 5 Fixed Cost £ 50 Variable cost £ 10 15 20 25 Total Cost £ 55 60 65 70 75 Reveal answers

Drawing the Cost Lines Total Cost Fixed Cost Variable Cost Click the boxes to reveal the graph lines Total Cost Fixed Cost Variable Cost Click to select a marker and drag it to plot the graph

Sold £15 Jane’s Sales Jane sells her toys for £15 each This is known as her PRICE Reveal answers Toys sold each month 1 2 3 4 5 Price £ 15 Sales Revenue £ 30 45 60 75

Click to select the marker and drag it to plot the graph Drawing the Cost & Revenue Lines Total Revenue Break even point Total Cost Fixed Cost Variable Cost Click to select the marker and drag it to plot the graph Break even output

Click here to show profit Drawing the Cost & Revenue Lines Click here to show loss Click here to show profit Total Revenue PROFIT Total Cost Fixed Cost LOSS Variable Cost Break even output