business

• Effective communication is essential for the success strong relationships with clients, employees, and stakeholders. of any business, as it helps in building
• START UP COSTS

  EXAMPLES

  Give two examples of start up costs that a shop may have.

  1. buying and installing a sign
  2. paying for a cash register
• OPERATING (RUNNING) COSTS

  EXAMPLES

  What is a running cost?

  1. day to day expenses the business has

  Give two examples of running costs that the sandwich shop may have.

  1. ingredients (stock)
  2. utility bills

  Why are these costs called ‘operational costs’?

  1. because they are costs involved in operating the business
• FIXED AND VARIABLE COSTS

  EXAMPLES

  What are fixed and variable costs?

  1. the running costs of a business can be divded into fixed costs and variable costs or direct or indirect costs, fixed costs are usually indirect and variable costs are usually direct

  Give an example of a fixed cost Anna might have.

  1. rent

  Give an example of a variable cost Anna might have.

  1. credit card fees
• • fixed costs stay the same
  • variable costs change depending on the number of products made or sold
  • direct costs are directly related to output
  • indirect costs are independent of output
• CALCULATING TOTAL COST

  EXAMPLE

  What is the formula to calculate total cost?

  1. variable cost+fixed cost=total cost
• CALCULATING VARIABLE COSTS

  EXAMPLES

  What is the formula to calculate variable costs?

  1. cost of one unit x number of units
• SOURCES OF REVENUE

  EXAMPLES

  Give two examples of sources of revenue which a computer shop may have.

  1. the sale of equipment and consumables
  2. repairing faulty equipment

  What are other sources of revenue?

  1. rent
  2. interest

  businesdes try to identify additional sources of revenue to earn as much money as possible

  How could Tianna create two more sources of revenue?

  1. charging extra for visiting client to repair their computers
  2. offering maintenance contracts to businesses
• CALCULATING REVENUE

  EXAMPLES

  What is the formula to calculate revenue?

  1. number of sales x price per unit

  What does revenue always mean?

  1. the money a business receives
• TYPES OF EXPENDITURE

  EXAMPLES

  What is expenditure?

  1. expenditure is money the business pays out

  What are everyday running costs called?

  1. overheads

  Tilly has a sweet shop, what are examples of overheads that Tilly must pay?

  1. wages for her assistant
  2. rent
  3. business rates
  4. utility bills

  What are other types of expenditure she may have?

  1. buying stock to sell
  2. she might spend money on advertising
• TYPES OF EXPENDITURES

  EXAMPLES

  STOCK is bought by retailers for resale (eg: Tilly’s sweets)

  CONSUMABLES are used by the business itself (eg: paper for till receipts)

  RAW MATERIALS are used by manufacturers to make a product (eg: sweet manufacturers need sugar)

  All businesses must calculate and record how much they spend. They need this info to work out if they made a profit or a loss
• UNDERSTANDING AND CALCULATING PROFIT OR LOSS

  EXAMPLES

  What is the formula for calculating a profit?

  1. revenue - expenditure

  Making a profit means the business can grow. The owner can buy new equipment or open another outlet.

  MAKING A LOSS

  Sometimes a business makes a loss. This happens when expenditure is more than revenue

  Businesses that make losses often have to stop trading
• BREAKEVEN CHARTS

  EXAMPLES

  A breakeven chart can be drawn to show how much a business needs to sell to break even and show how much it will need to make a profit
• INTERPRETING BREAKEVEN CHARTS

  The vertical axis on a BE chart shows money, i.e. costs and revenue

  The horizontal axis on the chart show units, i.e. number of items produced

  The BE point is the point where the total costs and revenue lines cross