Today, we’re going to talk about something very important for every business – Cost Estimation.

Cost estimation simply means knowing how much it costs to run a business or to produce a product. If you don’t know your cost, you might end up setting the wrong price — and lose money!

Let’s start with – Types of Cost.

There are two main types of cost:

1. Fixed Costs – These are the costs that stay the same no matter how much you produce.
   🧾 Example: If you rent a shop in Penang for RM2,000 per month, you still have to pay RM2,000 even if you sell one cake or one thousand cakes.

2. Variable Costs – These change depending on how much you produce.
   🍰 Example: If you’re baking cakes, the cost of eggs, flour, and sugar will increase as you bake more cakes. So, the more you sell, the higher your variable costs.

There’s also another one we call Total Cost, which is:
Fixed Cost + Variable Cost.

Next, – Changes in Cost at Different Levels of Operation.

This means that costs may go up or down depending on how big or small your business is.

📦 Example: Let’s say you run a nasi lemak stall. If you make 50 packs a day, your cost per pack might be RM2. But if you start making 500 packs a day and buy ingredients in bulk from suppliers, your cost per pack might drop to RM1.80. This is called economies of scale — the more you produce, the lower the cost per unit.

But be careful! If you expand too fast, costs might also increase — like needing to hire more staff, rent a bigger kitchen, or pay for delivery services.

So remember students:
✅ Know your fixed and variable costs
✅ Estimate how your costs will change if your business grows
✅ Use this information to set the right price

If you understand your costs, you can make smart pricing decisions and grow your business successfully.

That’s all for today. Let’s try some examples together in class!