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Costs

Costs. Lesson 2:Year 9 BTEC. Learning Outcomes. By the end of todays lesson……. I will be able to explain what fixed costs and variable costs are I will be able to give examples of fixed costs and variable costs I will know what total costs are and how to calculate it. Yesterday we learnt….

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Costs

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  1. Costs Lesson 2:Year 9 BTEC

  2. Learning Outcomes By the end of todays lesson……. • I will be able to explain what fixed costs and variable costs are • I will be able to give examples of fixed costs and variable costs • I will know what total costs are and how to calculate it

  3. Yesterday we learnt…. • That costs can be split into start up costs and operating costs. • What is the difference?????? • We can also split them into other sections called: • Fixed, Variable and total costs

  4. Fixed Costs • Fixed costs are costs that never change regardless of the number of products sold • This means that it doesn’t matter how many computer games you sell some costs will stay the same

  5. Examples of fixed costs Examples • wages of permanent staff • business rates • advertising • gas Example- A sports shop will have to pay rent, rates, insurance even if no products are sold. Can you think of 2 more items which could be fixed costs?

  6. Variable Costs • Variable costs are costs that change when the number of products made or sold change Examples: • Costs of materials • Staff wages (paid per hour) • Marketing costs Example – When a cafe sells more products they will need to buy more raw materials (bread and butter)

  7. What goes where? • Activity 1

  8. Lets do some maths  • You are working in a café and are making some cheese and pickle sandwiches. • All of the fillings for your sandwich cost 24p • The roll costs 6p • And the margarine is 1p. If you sell 1 sandwich today, what are your total variable costs? If you sell 50 of these sandwiches today, what are your total variable costs?

  9. Answer ANS= Cost per cheese and pickle sandwich = 24p + 6p + 1p = 31p PER Sandwich. Total variable cost = 31p × 50 = 1550p = £15.50

  10. What next • You now know which items are fixed costs and which are variable costs. • But what happens if you want to know what all your costs totalled together are. • These are called your Total costs Total Costs= Fixed Costs + Variable costs

  11. Answers • 1. For one cup cake the variable cost is £0.60p • 2. • 3. The variable costs for one cup cake is: £0.60p • The variable cost for 550 cup cakes are: £330.00 • The Total Costs = fixed costs + the variable costs • Fixed costs = 1000+1000+1500+165+75= £3740 • Total costs = 3740+330= £4070.00

  12. Activity • Complete the worksheet. • Make sure you show your calculations that you are using.

  13. Activity • On the piece of paper write down your own scenario question. • Make sure you include variable costs • Challenge: In your example question can you get someone to work out the total costs

  14. TRUE/FALSE QUIZ 1)Fixed costs will change depending on how many products you sell 2) Rent is an example of a fixed cost 3) Costs of materials are an example of a variable cost 4) Total costs= fixed costs - Variable costs

  15. Your homework • Learn the definitions and examples of the following: • Operating costs • Start up costs • Fixed Costs • Variable Costs • Total Costs • Also learn the formula for Total Costs.

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