theory on business costs for lesson 10. business costs some sources of finance will be available as...
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Theory on Business CostsFor Lesson 10
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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
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CostsCosts are the expenses involved in making a product.
Firms incur costs by trading.
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Costs of Running a Business
There are two different types of cost that a business will face:
Start-up Costs
Running Costs
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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
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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)
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Fixed Costs Costs which do not vary with output produced.
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Fixed Costs
SalariesRent and council taxMachinery and equipment
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Variable Costs
Costs which change directly with the number of products made by a business.
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Variable Costs
Raw MaterialsEnergyPiece-rate labour
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Total Costs
All costs of a business
Total Costs = Fixed Costs + Variable Costs
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Video
Watch this video:
http://www.bbc.co.uk/learningzone/clips/what-costs-are-involved-in-a-business/10961.html
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Fixed or Variable Activity
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