Fact file
a) Fixed costs have to be paid regardless of how much is produced, for example, rent and rates.
b) Variable costs are directly related to the amount produced or sold, for example, raw materials, and stock for resale.
Business Costs
There are three main types of business costs.
Start-up costs - These are gained before a business begins to operate, such as the purchase of land, building and equipment.
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Fixed costs - These are incurred once a business is running, no matter how many products it sells or how many customers it has. A car manufacturer has to pay heating bills whether it sells one car a day or a hundred. Fixed costs are also called indirect costs. They have to be paid whether the business is busy or quiet. If your sandwich shop was near a school, in term time you would be busy but during the holidays there would be fewer customers. But you would still have your fixed costs to pay.
a) Fixed costs have to be paid regardless of how much is produced, for example, rent and rates.
b) Variable costs are directly related to the amount produced or sold, for example, raw materials, and stock for resale.
Business Costs
There are three main types of business costs.
Start-up costs - These are gained before a business begins to operate, such as the purchase of land, building and equipment.
__________________________________________________
Fixed costs - These are incurred once a business is running, no matter how many products it sells or how many customers it has. A car manufacturer has to pay heating bills whether it sells one car a day or a hundred. Fixed costs are also called indirect costs. They have to be paid whether the business is busy or quiet. If your sandwich shop was near a school, in term time you would be busy but during the holidays there would be fewer customers. But you would still have your fixed costs to pay.