PA RT IX

PA RT V III &
U SI NE SS
T YO U R B
STAR
TABLE OF CONTENTS

VIII - Greening your IX - Costing your Goods

Business and Services
VIII - Greening your Business
 BUSINESS AND NATURAL
RESOURCES
Businesses rely on natural resources for production, including
materials (renewable or non-renewable), energy (from
renewable or non-renewable sources), and water. The health
of the natural environment impacts business viability. Overuse
and pollution harm resources, affecting businesses and worker
health. 🌿💼
 REDUCE, REUSE,
RECYCLE
Reduce: The first and most crucial step is to minimize
unnecessary consumption and waste.

Reuse: The second step involves reusing items to decrease

the amount of waste we generate.

Recycle: The third step, which should be considered when

reduction and reuse are not feasible, is recycling.

If all other waste management options have been exhausted,

disposal is the last resort.
 CLASSIFYING THE WASTE

CATHEGORY:
Organic waste is natural, like rotting plants, food, and animal
waste. It’s also called “wet waste”.

Inorganic waste is man-made, like metals, glass, and plastic.

It’s also known as “dry waste”.
IX- Costing your Goods and
Services
 R E C O S T ?
WH AT A
 FIXED VARIABLE
Fixed costs are expenses that don’t Variable costs are expenses that
change based on the volume of goods change based on the volume of goods
or services produced. or services produced.
 COSTING
Costing is the way you calculate the total cost of making or selling a good or
providing a service.

TOTAL VARIABLE TOTAL FIXED TOTAL COST

COST COST
 COSTING FOR A MANUFACTURER OR
SERVICE PROVIDER
STEP 1: ESTIMATE THE Variable Cost PER ITEM
To estimate the Variable Cost for each of your goods or services, follow
these five steps:
1. List your inputs: Write down all the things you need to make, your
product or service that cost money and change with how much you
make. Put this in the first column of your Product Costing Form.
2. Find the cost per unit: Write down how much each of these inputs'
costs for one unit in the second column.
3. Estimate input quantity: Write down how much of each input you
need to make one product or service in the third column.
4. Calculate input cost: Multiply the cost per unit (from step 2) by the
quantity needed (from step 3) for each input. Write this in the fourth
column.
5. Calculate variable cost: Add up all the amounts in the fourth column.
This is your variable cost per item. Write this in the space for item (1).
 COSTING FOR A MANUFACTURER OR
SERVICE PROVIDER
STEP 2: ESTIMATE THE FIXED COST PER ITEM
To estimate the Fixed Cost per item for each of your goods or services,
use part 2 of the Product Costing Form and follow these four steps:

1. Calculate your monthly fixed costs: Figure out how much your
business spends on each fixed cost item every month. Don’t forget,
you might be able to include costs for items you reuse and recycle.
This can help your business save money.
 COSTING FOR A MANUFACTURER OR
SERVICE PROVIDER
Depreciation: Depreciation is the loss in value of your business equipment, which is a cost to your business.

Your business should calculate depreciation for equipment,

• Equipment Selection: Only calculate depreciation for equipment that is expensive and has a long lifespan.
• Life Estimation: To estimate the equipment’s life, use personal experience, consult the supplier, or ask other businesses
using similar equipment.
• Depreciation Calculation: If you have multiple pieces of equipment, add up the monthly depreciation for each to get
the total fixed costs for your business.
 COSTING FOR A MANUFACTURER OR
SERVICE PROVIDER
1.Calculate your monthly variable costs: Your total variable costs are all the costs that change based on how much you produce.
To find your total variable cost for a month, multiply the variable cost per item by how many items you make in a month.

2.Find the fixed to variable cost ratio: The total fixed cost per month is for the entire business and needs to be divided among
each product or service your business makes or sells. The fixed cost for one item depends on the variable cost of making that
item. So, to find the fixed cost for one item, first calculate the ratio of fixed cost to variable cost for the entire business.
3.Calculate the fixed cost per item: Once you know the ratio of fixed cost to variable cost for the whole business, you can find
the fixed cost per item. Do this by multiplying the ratio by the variable cost of each item.
COSTING FOR A MANUFACTURER OR
SERVICE PROVIDER
STEP 3: ADD UP TO GET THE TOTAL COST PER ITEM Upon
completing steps 1 and 2, you are ready to work out the estimated
total cost per item.
 COSTING FOR A RETAILER OR
WHOLESALER
To illustrate how a retailer does costing, we use Tosama Cloth Bags as an
example. Below is a Product Costing Form for retailers and wholesalers.
You will learn how to do each step and how to fill in the form.
 COSTING FOR A RETAILER OR
WHOLESALER
STEP 1: GET INFORMATION ON the Variable Cost PER ITEM
For a retailer or wholesaler, variable costs are the costs of buying goods to
resell. Transport is also a variable cost, but since it’s a small cost for each
item sold and hard to calculate, it’s usually considered a fixed cost.
 COSTING FOR A RETAILER OR
WHOLESALER
STEP 2: ESTIMATE the Fixed Cost PER ITEM For retailers and
wholesalers, Fixed Costs are normally all the other costs you will have for
running your business, except the cost of buying goods to resell. To
estimate the Fixed Cost per item for each of your products, follow these
four steps:
• Total Fixed Cost: Calculate how much your business spends on fixed
costs each month and write it on the Product Costing Form.
• Total Variable Cost: Work out the variable costs for producing goods
or services each month and note it down.
• Cost Ratio: Find the ratio between total fixed and variable costs per
month.
• Fixed Cost Per Item: Use the cost ratio to calculate the fixed cost for
each item you sell or produce.
 COSTING FOR A RETAILER OR
WHOLESALER
1. Estimate the total Fixed Cost per month.
Here are some notes to help you fill out the Fixed Cost Form for your
business.
⚬ Labour Costs: Salaries, wages, and benefits for employees and
owners of retail and wholesale businesses are fixed costs.
⚬ Irregular Costs: Costs like insurance, licenses, tools, and
stationery that you don’t pay every month should be divided by
the number of months they are used to find the monthly cost.
⚬ Depreciation
 COSTING FOR A RETAILER OR
WHOLESALER
1. Calculate the total Variable Cost per month.
⚬ Total Variable Cost per Month: This is what your business spends
each month on goods to resell.
COSTING FOR A RETAILER OR
WHOLESALER
COSTING FOR A RETAILER OR
WHOLESALER
Guidelines for setting the final price of a product or service:

• Total Cost: Make sure the total cost of your product or service is not
higher than what customers are willing to pay.
• Customer Price: Consider how much customers are willing to pay,
which can be influenced by your marketing.
• Competitor Price: Be aware of your competitors’ prices; charging
more for identical products can be challenging.
T HAN
K YOU