How to calculate costs for beginners When starting a business, many small business owners make the critical mistake of failing to charge competitive prices. This is often due to a failure to differentiate between revenue and profit, but more importantly, because they ignore “fixed” costs. This article will cover basic costing for beginners. You will get the answers to what is costing? What are fixed costs? What are variable costs and how to calculate costs for beginners? Ready? Great. Let's start by understanding costs. What are costs? Costs : are all the money you spend to produce or sell your product or service. For example- if you are producing shirts, your costs will include the money you use to buy material i.e. cloth, buttons etc., labour and advertising expenses to promote the shirts. What is costing? Costing (or Break even analysis) refers to the way in which you calculate the costs of producing your product or delivering your service so as to determine the profitability