Btec Level 2 Essay examples

Submitted By rohan1234509
Words: 1580
Pages: 7

Contents Page

Introduction……………………………………………………….……………………Page 2
Costs…………………………………………………………….………………………...Page 2/3
Revenue………………………………………………………………………….……….Page 4
Profits………………………………………………………………………………………Page 5
What could happen if Whitehouse Crafts does not………………….Page 6
Control their cost
Bring in enough Revenue
Make a Profits
Available Options

Introduction
In this Task, I will Describing Cost, Revenue and Profits also I will be explaining what Start-up cost, Running Cost, Fixed Cost, Variable Cost means.
Also I will be explaining how and Cost, Revenue Profits will help and how they are linked to Whitehouse Crafts. Whitehouse Crafts is a Giftware Business, and I will be going into detail about how the business does financial forecasting focusing on their Cost, Revenue and Profit.
Costs
There are different types of Costs:
Start up Cost: is a once of payment also known as Capital Expenditure. This is an initial Cost of starting something. Also start-up cost is a payment paid associating with setting up a Business. For e.g. when the Business starts and buys, machinery, or building to setup its work.
Running Cost: is when an amount of money is spent regularly to operate a business, for e.g. the money is spent for things such as, Salaries, rent. This is a payment that is made day to day. Running cost is also known as Revenue Expenditure.
Fixed Cost: is the cost that never changes throughout a certain time no matter the level of output. Also this is the costs that do not vary in relation to the number of items produced.
Variable Cost: is the cost that changes depending on the Level of Output. For e.g. Material or Delivery Cost. Variable cost is completely opposite to Fixed Cost.
Firstly, the Start-Up Cost is linked to the materials that White House Crafts sells. The Materials are:

These will be included in the start-up cost because; to make a start on making a product, Whitehouse Crafts will have to buy a certain amount of Materials that will be required for making a product.
Secondly, the Running Cost is linked to the day to day expenses
Power: £2,000
Telephone: £500
Car Expenses: £2,000
Travel: £3,000
Furthermore, the Fixed Cost will be linked to the followings:
Rent Per Year: £11,000
Rates Per Year: £1,000
Wages: £144,750
These above will be the Fixed Cost because the, The Rent per month does not change because no matter the level of output they still need to pay the rent.
And lastly, the Variable Cost is the followings:
Tin: 30p
Wax: 20p
Fragrance oil: 20p
Core and Wick: 15p
Labels: 15p
These above are the Variable Costs because they can change. There is no limit to the followings. For e.g. Tin cost can change because Whitehouse crafts may need more Tins to make their product because they may be able to sell more than expected. Also similarly this applies for Wax, Fragrance oil, Core and Wick and Labels. These costs can change because Whitehouse Crafts may need to buy more of their materials to make their products because they may get more customers than expected those who may purchase at Whitehouse Crafts.
Importance of Cost
The importance of cost is the most important part of pricing because it many times decided the margin which adds up to form the price of a product. Furthermore, the cost is important because costs, fixed and variable, have to be paid regardless of how much is produced. They are also important to consider because they must be subtracted from revenue to find profit. Also, increased purchase costs means either an increase in costs to the consumer or a loss of profit to the buyer. On the other hand, a decrease in purchase costs means either lower cost to the consumer or an increase in profit margin to the buyer. The purchase cost and sales cost of goods or service determine the profit margin of the business. Also, businesses like Whitehouse Crafts will mostly, use the term Cost Cutting, the act of cutting costs, organisations like…