Costs, scale of production and break-even analysis

Business Costs & its reasons

Two different locations

What price

Can be compared

Using cost data

Deciding whether to stop production

Deciding on the best location

Setting prices

Economies of scale

Purchasing economies

Marketing economies

Financial economies

Managerial economies

Technical economies

Diseconomies of scale

Poor Communication

Low Morale

Slow decision making

click to edit

Depend on

The product has just been launched on the market - sales revenue might increase in future

The fixed costs will still have to be paid e.g. if the factory being used for the product is not sold

If the average cost per unit was not known, the business could charge a price that leads to a loss being made on each item sold

Costs are not the only factor to consider - there might not be any point in choosing s low-cost location for a new shop if its is in the worst part of town.