Miss Browne

Introduce yourself Why did you choose BTEC Business? An interesting fact, hobbie, sport,

football team or singer.

This qualification is worth one GCSE. You have to complete two core units:

Unit 1:Enterprise in the Business WorldUnit 2:Finance for Business

You will then complete two other units Your work will be assessed in a variety

of different ways e.g. tests, role plays, presentations, written work

We will be working on this unit for next few months.

Although it is not coursework based there will be set homework and assignments.

After the unit has been taught you will complete an ONSCREEN TEST.

There will be multiple choice questions and

Short answer questions and extended writing questions for stretch and challenge.

All will Identify the differences between start up costs and operating costs

Most will Identify what fixed and variable costs are

Some will recognise that some costs can be both start up and operating costs

Start up costsCosts that have to be met before a businesscan start selling any of there products. (may be one off costs)

Activity 1Mr Mason was walking past an estate agents where she saw a shop with a workroom for sale. This is perfect for him as he wants to open his own game console shop. In groups brainstorm all the things he would need to buy or pay for before he can open the shop and start selling.

These costs occur only once Maybe quite high (e.g for a new building)

Examples:•Fixtures and fittings•Computers• Machinery• Cash register, Premises, furniturepremises; fittings (display counters, and so on); microwave;refrigerator for cold drinks; fridge; till; insurance; telephone and any other appropriate items.

Costs that you pay when the business is up and running.

They are paid daily, weekly, monthly or on an annual basis.

Examples of operating costs include: advertising, buying more stock, paying wages, rent and insurance

Look at the pictures below. For two of them guess what the type of businesses are and write down their start up costs and running costs.

You friend has decided that they want to give you money to start your own business. You need to be able to give your friend information about the business you want to start.

Create a poster showing the type of business you want to start (add pictures)

You need to explain start up costs and operating costs and give as many examples you can think of.

You should all be able to tell me what start up costs are.

What operating costs are Be able to give examples of both

That costs can be split into start up costs and operating costs.

What is the difference??????

We can also split them into other sections These are called:

Direct and indirect costs Fixed, Variable and total costs

There are two main types of costs Fixed costs are costs that never change

regardless of the number of products sold

Variable costs are costs that change when the number of products made or sold change

When you add both of these together we get: Total costs

The calculation is:Total costs = fixed costs + variable costs

Fixed costs Costs that are not effected when a businesschanges the level of output.Examples wages of permanent staff; business rates; advertising; gas; electricity; telephone; water bills.

Example- A sports shop will have to payrent, rates, insurance even if no productsare sold.

Variable costsCosts that are affected when a businesschanges level of outputExamples: bread; margarine and meat/fish/salad items used to fill sandwiches; cleaning materials

Example – When a cafe sells more products

they will need to buy more raw materials, pay more for packaging

The fillings for your cheese and pickle sandwiches cost 24p.

The rolls cost 6p and the margarine is 1p.

If you sell 50 of these sandwiches today, what are your total variable costs?

ANS= Cost per cheese and pickle sandwich = 24p + 6p + 1p = 31p PER Sandwich.

Total variable cost = 31p × 50 = 1550p = £15.50

Is the bill paid once only? If so, cost is a

start-up cost.

Is the bill paid regularly? If so, cost is a operating cost.

2. ODD ONE OUT - Circle the ‘odd one out’

a)Which of the following is NOT a Start-up cost?

Raw materials, machinery & equipment, fixtures & fittings, wages

b) Which of the following is NOT a Running cost?

Electricity, rent, buildings, stock purchases

c) Which of the following is NOT a fixed cost?

Rent, wages, rates, machineryd) Which of the following in NOT a variable cost?

Packaging, wages, rent, interest payments on a loan