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COSTSCOSTSCOSTS are the money that a business has to pay out to keep the business running.
• Buying stock
• Paying Wages
• Telephone bills
• Rent
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TYPES OF COSTTYPES OF COST
Changes with number made
Rent per month
Wages per month
Bank loan per month
Advertising per month
Insurance per month
Raw material per item made
YesNoYesNoYesNoYesNoYesNo
YesNo
Click the boxes – Once for ‘Yes’, twice for ‘No’
No
No
No
No
No
Yes
Check answers
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TYPES OF COSTTYPES OF COST
Fixed / Variable
Rent per month No
Wages per month No
Bank loan per month No
Advertising per month No
Insurance per month No
Raw material per item made Yes
FixedVariable
FixedVariable
FixedVariable
FixedVariable
FixedVariableFixedVariable
Click the boxes – Once for ‘Fixed’, twice for ‘Variable’
Fixed
Fixed
Fixed
Fixed
Fixed
Variable
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A FIXED COSTA FIXED COST
Does not change with the number being made or sold
This does not mean that fixed costs can never change…
e.g. your landlord may put your rent up
the local council might put up the business rates
the bank may put up the interest on your bank loan
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A VARIABLE COSTA VARIABLE COST
Varies with the number being produced or sold
Usual example is the raw material cost of what is being made..
e.g. a sandwich bar would have bread, butter, cheese, tuna, mayo, etc as variable costs because the cost of these things will be different depending on the number of sandwiches being sold….the more sandwiches sold the more bread the sandwich bar will have to buy.
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Jane makes soft toys in her spare time……a very small business.
Jane’s Costs:
Bank Loan repayment £50 per month
Materials £5 per toy
Toys made each month 0 1 2 3 4 5
Fixed Cost £ 50 50 50 50 50 50
Variable cost £ 0 5 10 15 20 25
Total Cost £ 50 55 60 65 70 75
Reveal answers
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Drawing the Cost Lines
Fixed Cost
Variable Cost
Total Cost
Click to select a marker and drag it to plot the graph
Click the boxes to reveal
the graph lines
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Jane’s Sales
Jane sells her toys for £15 each
This is known as her PRICE
Toys sold each month 0 1 2 3 4 5
Price £ 15 15 15 15 15 15
Sales Revenue £ 0 15 30 45 60 75
Reveal answers
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Drawing the Cost & Revenue Lines
Fixed Cost
Variable Cost
Total Cost
Click to select the marker and drag it to plot the graph
Total Revenue
Break even point
Break even output
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Drawing the Cost & Revenue Lines
Fixed Cost
Variable Cost
Total Cost
Total Revenue
Break even output
LOSS
PROFIT
Click here to show loss
Click here to show profit
