Theory on Business Costs For Lesson 10
Dec 24, 2015
Theory on Business CostsFor 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
CostsCosts 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
SalariesRent and council taxMachinery and equipment
Variable Costs
Costs which change directly with the number of products made by a business.
Variable Costs
Raw MaterialsEnergyPiece-rate labour
Total Costs
All costs of a business
Total Costs = Fixed Costs + Variable Costs
Video
Watch this video:
http://www.bbc.co.uk/learningzone/clips/what-costs-are-involved-in-a-business/10961.html
Fixed or Variable Activity
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