Running Costs- Running costs are paid everyday to run the business, examples of these are wages, bills, raw materials and insurance.
Overall Total: £151.50
Overall Total: £399
Task Two
The following section I will be explaining the importance of costs, revenues and profits.
It is important to have low costs for a business because it helps achieve profit maximisation and also you can then keep up with the other businesses in the area. Also it can help businesses keep clear of any debt that has overcome their business.
A business can reduce its fixed costs by many ways. If a business moves to cheaper premises then they won’t have to be paying a higher rent and the money coming in can be turned into profit and can be spent on other useful equipments that can help the business proceed.
Variable costs can be reduced by any businesses. This can be done by getting a new supplier who offers cheaper raw materials. However if they find a cheaper supplier then they quality of the product may be reduced, this is something most business must think about.
Lucy and James can reduce their costs in many ways. One way in which Lucy and James can reduce their costs is by moving to a cheaper premise. Their rent is at £40 a week, if they move out to a cheaper premise then the rent will decrease and more money can be put into profit.
It is important to maximise profit because if you gain a higher amount of profit then you can spend that extra money you gain on stuff like equipment and machinery that might be able to make your business more successful. One way in which businesses can increase their profit is increasing the prices of their profit.
A business can increase their revenue in many ways. One way in which they can do this is by increasing the prices of their products if they get the same amount of customers each time. Also if a customer is buying two of the same product they could offer them discounts for example buy 2 for the price of 1.
James and Lucy can increase their revenue in many ways. One way in which they can do this is by offering their customer’s discounts for example buy 2 ice lollies for the price of 1. Cheaper prices will also increase their revenue as the consumers will prefer to buy something for cheaper than what other businesses are offering it for. Another way they can increase their revenue is by putting up posters around their local area and then more people will recognise their business and more people will turn up for some ice lollies.
Costs and revenue are very important in making profit. If you reduce your costs then you will be making more profit. For example if you move to cheaper premises then you will be paying less money for rent, and let’s just say you’re getting the same amount of customers and you are charging them the same amount of price you will be making a greater profit. To make a greater profit you can reduce more costs and increase your product price to a reasonable amount that the customers will not mind paying, and then more money will be coming into your business and can be spent on other things.
