1. Unit 3 Financial Forecasting for Business
Aim 1: To understand the different types of costs
Aim 2: To know examples of each type of cost

2. To know the four types of costs that are incurred by a business.
What are costs?
According to BBC Bitesize “Costs are the expenses involved in making a product. Firms incur costs by trading.”
Start-up costs
Operating costs
Fixed costs
Variable costs

3. Start up costs Start-up costs
Money spent by a business before trading begins.
Often the time of greatest expenditure.
What does a business need to spend money on to get started?
Can include: Premises, equipment, stock, research fees, licensing fees, marketing, staff and utilities, vehicle lease/purchase

4. Operating Costs Operating Costs
What the business spends money on to keep trading.
What does a business need to spend money on to stay in business?
Can include: Stock, rent/mortgage, utility bills, salary/wages, marketing/advertising, vehicle fuel

5. Fixed costs Fixed costs These do not change with a change in use .
They may increase or decrease over time.
Which costs we have discussed are/ can be fixed costs?
Premises Rent/Mortgage, Salary, Utilities (fixed contract) vehicle/equipment lease, business rates

6. Variable costs Variable costs
These costs go up or down depending on how much they are used.
What examples have we discussed?
Utilities (metered) wages (hourly/daily etc) stock, vehicle fuel, stationary (paper/stamps etc)

7. Conclusion There four main type of cost Start-up costs Operating costs
Fixed costs
Variable costs
Often overlap
Important to control high costs = lower profit
Fixed costs hardest to control but the best for your business.
Variable costs easier to control but less effect.