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The Cost and Revenue of Running a Business

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					The Costs of Running a
      Business
         Lesson Objectives
At the end of this presentation you
 should be able to :
Apply the appropriate terms to the cost of
 running a business.
Use formulas correctly in determining the
 cost of running a business.
Begin the creation of your student run
 business by creating a cost analysis.
   Business Costs: There are many costs
involved in running a business, the following
  are instrumental in running a successful
                  business.


     Fixed Costs
    Variable Costs
     Total Costs
                 Fixed Cost
 A fixed cost is like a
  solid brick wall that
  has little to no change
  over the years.




Fixed Cost: Cost or expense, that does not
change as output changes.
  Which of the following are fixed
  costs of running a fruit market?

Building Rental
Utilities
Employees Wages
Advertising
            You are Correct!
Building rent is a great
  example of a fixed
  cost because it is a
  business cost that
  does not change from
  month to month.
         You are Incorrect!
Your choice is a cost that could change
 each month.
                 Variable Cost
 A variable cost is like
  a leaf in the fall that is
  always changing.




   Variable Cost: Cost or expense that
   changes as output changes.
Which of the following are variable
 costs in running a fruit market?

Building Rent
Forklift Lease
Delivery Van Payments
Employee Wages
           You are correct!
Employee wages is a
 great example of a
 variable cost
 because each month
 you may need to hire
 new workers, lay-off
 workers, or pay for
 overtime.
         You are Incorrect!
Your choice is a cost that does not change
 from month to month, it remains constant.
                  Total Cost
 Total cost is like the universe because it
  encompasses everything.




Total Cost: Fixed Cost + Variable Cost
  Which of the following would be
   an example of a total cost of
      running a fruit market?
Building Rental + Delivery Van Payment
Fruits and Vegetables + Utilities
Employee wages + Building Rental
Utilities + Employee Wages
           You are Correct!
Employee Wages are
 an example of a
 variable cost.
 Building rental is an
 example of a fixed
 cost. Fixed cost +
 Variable Cost = Total
 cost

            +            =
          You are Incorrect!
Your choice did not include both a fixed cost
 and a variable cost.
          Real Life Example
A firm produces 125 units of a good. Its
  variable costs are $400, and its total costs
  are $700.
 What do the firms fixed costs equal?
 $700
 $300
 $400
 $1100
 Application To Your Student Run
             Business
 You can now list all the materials needed
  in running your business.
 You should be able to divide the
  necessary materials into Fixed Cost and
  Variable Cost.
 You should be able to apply the following
  formula to determine the total cost of
  running your business: Fixed Cost (FC) +
  Variable Cost (VC) = Total Cost (TC)
Congratulations
You now have the
necessary
information to
create a cost
analysis for your
student run
business. Apply
your terminology
and formulas to a
spreadsheet format
by clicking on the
micro-soft excel
icon, and creating
a cost analysis
spreadsheet.

				
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posted:5/5/2010
language:English
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