1. Theory on Business Costs For Lesson 10

2. 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

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

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

5. 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

6. 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)

7. Fixed Costs Costs which do not vary with output produced.

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

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

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

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

12. Video  Watch this video:  http://www.bbc.co.uk/learningzone/clips/what-costs- are-involved-in-a-business/10961.html http://www.bbc.co.uk/learningzone/clips/what-costs- are-involved-in-a-business/10961.html

13. Fixed or Variable Activity  www.businessstudiesonline.co.uk/live/index.php?option =com_content&view=article&id=35&Itemid=23 www.businessstudiesonline.co.uk/live/index.php?option =com_content&view=article&id=35&Itemid=23