Business costs

What is the meaning of cost?

• The selling price of a product

• The amount of money needed to buy, make or do something

What is the meaning of FIXED costs?

• Costs that stay the SAME regardless of the quantity produced. Usually paid monthly.

• Costs that CHANGE according to the quantity produced.

What is the meaning of VARIABLE costs?

• Costs that stay the SAME regardless of the quantity produced.

• Costs that CHANGE according to the quantity produced.

What are examples of fixed costs?

• Rent, monthly salaries, Wi-Fi bill, phone bill,

• Raw materials, delivery, advertising

What are examples of variable costs?

• Rent, monthly salaries, Wi-Fi, phone bill

• Raw materials, delivery, advertising

What is the formula for variable cost per unit?

• Variable cost per unit = Total variable cost / Number of units

• Variable cost per unit = Total variable cost x Number of units

Variable cost per unit = Total variable cost / Number of units.

A bakery makes 500 cupcakes. The total variable cost is 250 AED.

Calculate the variable cost per unit.

• 0.5 AED

• 2 AED

What is the formula for TOTAL COST?

• Total cost = Fixed costs - Variable costs

• Total cost = Fixed costs + Variable costs

Total cost = Total fixed costs + Total variable costs.

The fixed costs are 2000 AED rent and 1000 monthly salaries. The variable costs are 500 AED raw materials and 500 AED electricity bill.

Calculate the total cost.

• 3000 AED

• 4000 AED

What is the formula for AVERAGE COST?

• Average cost = Total cost / Number of units

• Average cost = Total cost x Number of units