; Covering the costs of a new product or service
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Covering the costs of a new product or service


  • pg 1

_____________ - ______________

          = PROFIT!
Covering the costs of a
new product or service
Types of costs 1
Start-up costs:
 Are payments made before, or soon after, the start
  of a project
 Occur only once

 May be quite high
  (eg for a new building)
Types of costs 2
Running costs:
 These begin once the project has started

 They arise on a regular basis

 Must be paid for as long as the project lasts
Choose a company!
From a list of the companies below
examine the start up and running costs:

-   New IKEA store in MK
-   Tesco Wolverton Store
-   SPAR Store, Deanshaner
-   The Kebab Van, Deanshanger
Examples of start-up costs
   New building or extension to existing building
   New machines, including installation
   Office equipment, including ICT
   Market research and advertising
   Initial stocks of materials
   Installation of gas, electricity, telephone lines
   New vehicles
Examples of running costs
   Wages and salaries
   Heating and electricity
   Repairs and maintenance
   Business rent and rates
   Materials and stationery
   Telephone
   Advertising
   Vehicle running costs (eg diesel fuel)
Which is which? 2
1.   Cash register for new shop
2.   Rent for original shop
3.   Original stock for new shop
4.   Salaries to staff in new shop
5.   Salaries to staff in original shop
6.   Redecoration of new shop
7.   Fittings for new shop
8.   Electricity bill for new shop
9.   Electricity bill for original shop
Danni’s Garden Equipment

Complete on sheet provided whether
 the expenses for Danni’s business
    are start up or running costs
    Some types of costs can be both start-up and
    running costs, eg

   Stock (initial stock = start-up; regular stock =
   Advertising (initial adverts = start-up; regular adverts
    = running)
Key questions to ask
   Is the bill paid once only? If so, cost is a
    start-up cost.

   Is the bill paid regularly? If so, cost is a running
ICT/Reducing Costs
 Write down 5 ways that a business
 can cut its costs to reduce its costs.

  Use the traffic light system –
  analyse each of the learning
   objectives and classify your
   understanding of each one.

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