COSTS Unit 2 – Part 1

Starter You have 7 mins to design a front cover for your work for this unit! It must include the following:  The title: Unit 2 – Business Finance  Your name  Pictures relating to Business Finance Please print it and collect a plastic wallet to put it in.

Lesson Objective To be able to identify running and start-up costs.

What are “Start-up Costs”? These are costs that must be met BEFORE the business can start selling any products. They include, for example:  Buying premises  Buying equipment  Purchasing initial stock  Doing Market Research.

Task 1 Mrs Masson was looking in an estate agent’s window. She has seen an empty shop for sale where she could make the saris. Work in pairs and on post-it notes, write all the things she would need to buy or pay for before she could open the shop and start selling her product. Take it in turns to bring them up to the board to create a long list of examples!

Start-up Costs

Operating or Running Costs These are costs which, once the business is up and running, will have to be paid daily, weekly, monthly or annually. They keep the business going! They include:  Advertising  Buying more stock  Paying wages  Rent  Insurance  Electricity  Van repairs  Petrol

Task 2 1. Joe is thinking of becoming a window cleaner. His likely customers will live at opposite ends of the town. List his likely start-up and running costs. 2. Lisa wants to open a hairdresser’s salon. List her likely start-up and running costs.

Joe Lisa

Task 3 Work in pairs to see if you can guess the type of business represented in the pictures below. For each type of business suggest 2 start-up and 2 running costs. Who will get the answers first?

Task 4 Which of the following are start-up and which are running costs?  Buying an ice-cream van  The wages of the driver  The cost of the ice-cream maker  Petrol for the van

Task 5 Rearrange the following into 2 lists – Start-up costs and running costs. Some may be in both lists! Cost of premiseselectricityphone bill Estate agent’s feesstockcomputer wagesfurnitureVan TrainingTax for vanInsurance AdvertisingCash registerPetrol

Task 6 Draw a table similar to the one you just looked at, but use the following as your examples:  For the retailer, use a corner shop (sells groceries, rents videos and delivers papers.)  For the service supplier, use a dry cleaner (cleans clothes and cuts keys.)  For the manufacturer, use a furniture maker (Buys wood and makes into high quality furniture.) Complete your table by writing in their start-up and running costs.

Recap How would you describe a start-up cost? 1 mark How would you describe a running cost? 1 mark Explain, with an example, why some costs can be both start-up and running costs. 3 marks Have we met our objective???  To be able to identify running and start-up costs