Fixed And Variable Costs
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Fixed And Variable Costs

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    Fixed And Variable Costs Fixed And Variable Costs Presentation Transcript

    • Costs
      • All businesses have costs. A cost is any spending on goods and services for the business.
      • Create a spider diagram to show as many costs as you can think of that a business might have. Use these 4 main headings:
      Costs Production Sales/Marketing Premises Staff
    • Fixed and Variable Costs
      • Fixed Costs
      • Are costs which stay the same over the year. They do not change if the firm sells more goods or makes fewer items.
      • Variable Costs
      • Are costs that change as output changes. If a company sells or produces more goods these will increase.
    • Task
      • Write down next to each of the costs you have listed an F for a fixed cost or a V for a variable cost
    • Diagrams of Costs
      • When we know the fixed and variable costs of a product we can work out the total cost .
      • Total Costs
      • Are all of the costs a business has:
      • Total Costs = Fixed Costs
      • + Variable Costs
    • Diagrams of Costs
      • The total cost lets us work out the average cost – this is how much it cost to produce one item.
      • Average Cost = Total Cost
      • Number of Units
    • Costs Chart
      • Output 0 100 200 300
      • Fixed Costs 2000 2000 2000 2000
      • Variable Costs 0 200 300 390
      • Total Costs 2000 2200 2300 2390
    • Costs Graph
    • Average Costs
      • Output 0 100 200 300
      • Fixed Costs 2000 2000 2000 2000
      • Variable Costs 0 200 300 390
      • Total Costs 2000 2200 2300 2390
      To calculate average cost, we divide the total cost by the total output. E.G.: £2300 divided by 200 = average cost of £11.50
    • Task
      • Draw a graph to show the costs for the following company:
      970 1000 400 885 1000 300 795 1000 200 700 1000 100 0 1000 0 Total Costs Variable Costs Fixed Costs Output