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Starter _____________ - ______________ = 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 Warning! Some types of costs can be both start-up and running costs, eg Stock (initial stock = start-up; regular stock = running) 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 cost. ICT/Reducing Costs Write down 5 ways that a business can cut its costs to reduce its costs. Plenary: Use the traffic light system – analyse each of the learning objectives and classify your understanding of each one.
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