Are ‘one-off’ costs paid for when you start up a new business E.g. School –
• School building
Are day-to-day costs paid for to run the business
E.g. School –
• Electricity + heating • Food.
Start-up costs in
Running costs in
• Market research – to assess business potential.
• Building alterations –Expansion, decorate. • Fixture and fittings –Shelving, floor, toilets.
• Furniture and equipment – desks, counters, till, computers.
• Communication equipment – telephone, fax.
• licenses./ permits – gambling license or alcohol license.
• Owners salary.
• Staff salary/wages.
• Insurance payments.
• Rent or mortgage repayments.
• Business rates – this is a tax to
• the local council i.e. Camden.
• Stock – raw materials.
• Gas, electricity, water rates.
• Communication charges –
Telephone and internet charges.
• Loan repayments
• Packaging material – bags
• Cleaning equipment – window cleaner, polish.
• Account fees – check whether the business is make a profit or loss
What are the start-up and running costs for:
• Ice cream shop
Paid back with profits earned by the business during the year
(Cost of sales) Break-even analysis - Fixed – Variable costs
Profit and Loss account - Expenses – Cost of sales
Types of costs
Fixed costs: costs which do
Variable costs: Costs which not change regardless of how change with the number of many products you sell. (You products you sell. (The still HAVE to pay for them more you sell the higher even if the business has made the cost) no sales)
Rent on buildings
Raw materials/ Stock
Interest on loans
Wage - commission
Wages each month
What are the costs involved in running a pizza • Direct cost:
A cost which can be clearly identified with a particular unit of output. Direct costs are known as variable costs • Indirect cost:
A cost which cannot be identified with a particular unit of output. It is often incurred by the whole organisation or department. Indirect costs are known as fixed costs.
Production of Nike Trainers
• Direct costs
Staff paid on commission
Insurance on machines
Utility bills, electricity and telephone bill
TOTAL COSTS = FIXED COSTS + VARIABLE COSTS
For any business that aims to make a profit they use this simple formula:• Sales Revenue – Total cost = Profit
In other words
Sales Revenue – (fixed cost + Variable cost) = Profit
• Revenue – is the income a business earns from selling its goods/services • They use this money to pay for their Total costs (fixed and variable costs).
• Any money left after, is classed as PROFIT
Miss Patel’s Cookie store all cookies for £1
To calculate sales revenue you use the following formula:
Selling price x number of products sold
Sell cookies for £1
In march I sold 700 cookies
Answer: 1 x 700 cookies = £700
Selling price for T-shirts - £24
In march they sold 1000 T-shirts
Answer: 24 x 1000 = £24,000
Miss Patel’s Cookie store all cookies
FC and for £1VC
Variable cost to make ONE cookie
Milk and Butter
Miss Patel’s Cookie store
Sales revenue £1 x 4500 =
Fixed cost (rent, wages, bills) = £ 1200
Variable cost (dough, sugar,
chocolate chips) =
£ 3000 PROFIT IN
Miss Patel’s Cookie store all