1. Tuesday 10th December Mr Nicholls
Year 11 Business
Tuesday 10th December
Mr Nicholls

2. Objectives
To consider the importance of keeping costs down within a business.

3. Today… Firstly- the remaining presentations.
Secondly – Cost Effective Operations.
Thirdly – Mock Exam Feedback
Fourthly – Lunch time.

4. Presentations… There were a couple we didn’t get through.
Now is your chance to shine!

5. So then…
Cost Effective Operations – what do we think this means?

6. Cost Effective Operations
Within a business we need to ensure we keep costs down – it’s that simple!
As such we’ll need to consider:
Materials – the materials used to manufacture/produce the product we’re selling.
Other DIRECT costs – this could be hiring machinery to produce things or buying equipment.
Labour – we’ll need staff!
FIXED COSTS – they don’t change – so for example:
Rent & council tax
Wages and salaries
Marketing (advertising, market research)
Insurance, banking & legal fees
Software
Consultant and adviser costs
Design and development
Heating, light and other energy costs
Leased equipment charges

7. Key Terms:
FIXED COSTS: Fixed costs do not change as output varies.  In other words, they are fixed even if output moves up or down from period to period
VARIABLE COSTS: Costs which change when output changes are called “variable costs”
Variable costs tend to be those relating directly to the production or sale of a product.  Good examples include:
Raw materials
Bought-in stocks and components
Wages based on hours worked or amount produced
Marketing costs based on sales (e.g. % discounts offered on a sales price)
Agent and other commissions

8. How can we keep costs down?
Automation and Productivity – these are our two key things to consider here:
Automation refers to processes that are carried out rather than machinery rather than people.
This means the business buys the machinery once, then they work for the business where as an employee would have to be paid.
Productivity refers to the output per worker per hour, so is a representation of how efficient workers are!
By monitoring this, the business can see whether they need to get rid of staff or do more training to improve their ability.

9. So then…over to you…
Text books Page 67 – EXERCISES – answering Questions 1-5 please.
When complete – Page 68 – Practice Questions – answering questions 1-4 please – to be completed for homework.