Alan rents the factory
for £1,000 per month.
Fixed
£1,000 per month
Each jumper is made of wool.
Wool costs £5 per jumper.
Alan has an advert on local
radio for £45 each week.
Fixed
£150 per month
Fixed and Variable Costs
Variable
£5 per jumper
Variable
£1.50 per jumper
Fixed Costs
Variable Costs
1. Label all of the fixed costs around the
factory.
1. Label all of the variable costs.
2. List examples of fixed costs:
Wool (raw materials)
Buttons (components)
Packets (packaging)
1,000 + 180 + 150 + 100 + 2000
= £3,040 per month
Each jumper has three buttons
which cost £0.50 per button.
Jumpers go into a packet when
they’re made. Each packet costs
Alan £1.00.
The factory’s electricity bill is
£150 every month.
3. What are Alan’s fixed costs each month?
Show your working.
Fixed
£100 per month
Alan pays himself a salary of
£24,000 per year.
Fixed
£2,000 per month
Fixed
£180 per month
Rent
Salaries
Utilities (electricity etc.)
Salaries
Loan Repayments
Alan pays back a loan at
£100 every month.
2. List examples of variable costs:
3. What are Alan’s variable costs per jumper?
Show your working.
5.00 + 1.50 + 1.00
= £7.50
4. What are Alan’s variable costs for 5000
jumpers? Show your working.
7.50 x 5000
= £37,500
Variable
£1 per jumper
Total Costs
1. What is the formula for total costs?
Fixed Costs + (Variable Cost per Unit x Quantity)
2. What are Alan’s total costs for 5000
jumpers (per month)? Show your working.
3,040 + (7.50 x 5,000)
= £40,540
3. What are Alan’s total costs for 10,000
jumpers (per month)? Show your working.
3,040 + (7.50 x 10,000)
= £78,040