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
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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.