Costs

Cameron Balloons, like any business, has a number of costs in order to produce a product, in their case, balloons.

These can be divided into:

• Fixed costs - those costs which do not change with the amount of product made (for example, rent or the fixed part of power bills).
• Variable costs - those costs which DO change as the amount of product changes. Examples include raw materials, power and labour costs.

Another way in which Cameron Balloons can divide its costs is into direct and indirect costs:

• Direct costs are similar to variable costs. They are costs that arise directly from the making of a product. They include raw materials, power, labour, etc. - although it is often difficult to say exactly how much power, or labour, has been used to make a product.
• Indirect costs are usually known as overheads. These are costs that are not directly linked to the product such as marketing and administrative costs.

Why not now try the worksheet on Cameron Balloons’ costs? This could help you with your portfolio work.