7 Costs and Budgeting

Fixed Costs in running a business are costs that do not change no matter what the circumstances are. Some examples of fixed costs are rent or mortgage, insurance, salaries, interest payments, and property taxes.

Variable Costs go up or down depending on the circumstances of your business. Some examples of variable costs are food, hourly labor wages, and utilities. Variable costs generally go up when your business volume goes up.

For Semi-Variable Costs, part of the cost does not change for any reason, but part of the cost does change depending on the circumstances. A good example of a semi-variable cost is payroll. Labor costs for managers who are on salary stay the same no matter what the business volume is, but hourly labor wages go up when business volume goes up. So in the overall payroll, part of the costs stay the same, and part of the costs fluctuate with business.

Benefits for employees need to be taken into account when making a budget. Some examples of benefits are: paid time off, health insurance (which might include vision or dental), retirement, disability, wellness programs, and tuition reimbursement.

For this assignment we will apply the basic math we already know to these concepts.

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Purpose

To learn some basic concepts related to business costs and budgeting and to practice math around these concepts.

Outcomes

By completing this assignment, you will be able to…

1. Understand different types of business costs.
2. Do some math related to basic budgeting of business costs.
3. Understand different types of benefits and how they affect a budget.

Instructions

To complete this assignment…

2. Round answers to the nearest hundredth, if necessary.
3. Be sure to show how you set up each problem.

Tips for Success

To help in the completion of this assignment, make sure to:

• Round all answers to the nearest hundredth, if necessary.
• Include how you set up each problem in order to get credit.

Costs and Budgeting Assignment

1) If a monthly mortgage payment is \$1,891.42, how much should you budget for the year?

2) If your bakery manager has a salary of \$42,000 per year, and she is paid on the 15th and the 30th of each month, how much will her base pay be for each paycheck?

3) If you are planning to spend 5% of your budget on the lease, and your lease payment is \$11,200 a month, what is your total restaurant budget for the month?

4) Property taxes for your bakery for the year will be \$13,500. If you pay property taxes twice a year, how much will you pay in each payment?

5) If the servers in your coffee shop receive wages of \$13.69 per hour, how much in base wages will one server make if he works a 50-hour week?

6a) If you want to make a profit of 30% on the cakes you sell, and it costs \$29.61 to make a particular cake, how much profit would you want to make on that cake?

b) How much should you charge for that cake to make 30% profit?

7a) If your utilities bill goes up 20% in October from the bill in September, and the bill in September was \$965, how much did it go up in the month of October?

b) What was the utilities bill in the month of October?

8a) If your ingredient costs in February were \$38,450, and in March they were \$41,235, how much did they increase in the month of March?

b) What percent of February’s costs was the increase in ingredient costs?

9) If a bakery assistant gets 40 hours of paid time off in a year, and is paid \$15 an hour, how much will this benefit cost you?

10a) If health insurance costs \$267 per month per employee, how much will you pay per month if you have 15 employees?

b) How much will you pay for these employees for a full year?

11a) If disability insurance for an employee costs \$468 per year, how much will the monthly payment be?

b) What will you pay per month if you cover 20 employees?