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- There's no ice cream shops here.
- Did you hear that? Let's have an ice cream shop! We can have lots of money!
- Yeah, that's bad. Hope we can have one here soon.
- We need to rent a shop first. I saw a shop on the street that needs to rent. That costs £300 per month.
- That's good. We need to buy some ingredients to make ice cream. We also need to buy some chairs and tables.
- 5 hours later
- Let's sell 1 cup of ice cream £2, I think that we'll have a good business.
- I've rented the shop. We can start selling ice cream next month. How much did you pay for the ingredients?
- I payed £200 on the ingredients. I made 10 cups of ice cream and it used £5. I payed £50 for buying tables and chairs.
- This ice cream shop is so nice!
- I've sold 400 cups this month.
- In this ice cream business, the fixed cost is the money for renting the shop and the costs for the chairs and tables. So the total of fixed cost is £350. But £300 needs to pay every month.
- Total cost is fixed cost plus variable cost. Our total variable cost is £200. So our total cost is £550.
- The variable cost in this business is the cost that we used to make 1 cup of ice cream. So our variable cost is £0.5.
- If our total revenue is less than our total cost, then we make a loss.
- This month our revenue is £800.
- Because profit/loss=total revenue-total cost, and this month our total revenue is £800 and total cost is £550, so we have£250 profit.
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