Theory on Business Costs For Lesson 10. Business Costs  Some sources of finance will be available as soon as the business starts up  Some sources are.

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Presentation transcript:

Theory on Business Costs For Lesson 10

Business Costs  Some sources of finance will be available as soon as the business starts up  Some sources are only available in the longer term

Costs  Costs are the expenses involved in making a product.  Firms incur costs by trading.

Costs of Running a Business There are two different types of cost that a business will face:  Start-up Costs  Running Costs

Start-up Costs  These are “one-off” costs that have to be paid when a business sets up, they include:  Premises - very expensive!  Machinery and equipment  Fixtures and fittings  Market Research and Promotion

Running Costs  These are the costs incurred on a day to day bases, they include:  Sales and Marketing (e.g. advertising)  Administration (e.g. insurance, rent, postage)  Production (e.g. raw materials)  Human Resources (e.g. wages, training)  Finance (e.g. loan repayments)

Fixed Costs Costs which do not vary with output produced.

Fixed Costs  Salaries  Rent and council tax  Machinery and equipment

Variable Costs  Costs which change directly with the number of products made by a business.

Variable Costs  Raw Materials  Energy  Piece-rate labour

Total Costs All costs of a business Total Costs = Fixed Costs + Variable Costs

Video  Watch this video:  are-involved-in-a-business/10961.html are-involved-in-a-business/10961.html

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