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Greetings to all of you participants of this week's course. This topic interests me to join and learn so that I have good knowledge in running the business that I am doing.

Before that I would like to invite @abdullahw2 @rumaisha and @neelofar.

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What is meant by cost structure and how is it important for business?

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Structure means the arrangement of several elements in a system, in this case the cost of the business. So the cost structure can be said to be the arrangement of several strategies in financing a business as a whole.

This cost structure is the basis and most important for a company to determine the steps and strategies in making decisions related to the products produced, the price of a product, and also the profits obtained.

By using the cost structure method, a company is able to determine strategic steps to ensure business continuity and can maintain market opportunities to compete competitively.

Give an example of a business that uses the cost structure method described; Reason for your answer.

Several businesses can use this method, one of which is a fast food restaurant business. This is the business that I am currently running. In running this business, I must be able to arrange and calculate fixed costs and variable costs.

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For example, I calculate the cost of renting a shop per year, the cost of cooking equipment, and also employee salaries. In addition, I also need to calculate variable costs such as costs for raw materials, electricity and water bills. By using this cost structure method, I can determine the price of the food I will sell and ensure profit on each of my sales. In addition, I can also evaluate the selling price at any time, depending on the increase in costs that I incur.

What are the elements of the cost structure? Give an example,

There are several elements in the cost structure, but there are 2 elements that are often used by business actors.

1. Fixed costs.

These are costs that do not change and are not affected by business activities. For example, I am a food business actor who has to pay shop rent every year. I have to pay shop rent with a fixed cost to the shop owner, even though my business is experiencing losses or even a lot of profit. This cost is called a fixed cost.

Another example is employee salaries, even though my business is at a loss, I still have to pay workers' wages.

1. Variable costs.

Variable costs are often unpredictable. Therefore, it is important to apply the cost structure method so that an entrepreneur can strategize and overcome this cost problem.

As a simple example, every day I have to buy raw materials to make food for my customers. The raw materials I buy have a price that is not fixed for each day. This means that the price of the raw materials can change at any time.

Another example is the cost of maintaining work equipment. This includes variable costs, this is because we cannot predict the exact cost of maintaining work equipment or even having to replace work equipment if it is damaged.

For this reason, it is important to use the cost structure method so that we have the right framework and can take strategic steps to ensure that the business we manage does not experience losses.

Prepare a business cost structure dedicated to making cakes. This company produces 5 cakes per day and expects to obtain a total profit margin of 25%

To determine the selling price and profit of 25% of the cake product, we will calculate it as follows:

Materials	Unit	Price
Flour	500 grams	$2
Sugar	300 grams	$0.50
Butter	100 grams	$0.50
Eggs	5 eggs	$2
Total cost for 5 cake units		$5

Here it is found that the cost of raw materials for production for 1 cake unit is $1. If in one day you can produce 5 cakes, then in a month (30 days) you can produce 150 cake units.

Now we will calculate the costs that must be incurred:

Type of Cost	monthly cost	number of units per month	joint unit cost
Workers	$900	150	$6
Shipping	$300	150	$2
Other costs	$150	150	$1
Total cost	$1,350	150	$9

Here it is found that the cost of producing one unit of cake is $1+$9=$10.
To get a profit of 25%, the selling price of the cake is the amount of capital plus 25% profit, which is $2.5.
$10×0.25=$2.5.
$10+$2.5=$12.5.
This means that the cake must be sold at a price of $12.5 per unit.