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Chapter 19 - Mindmap (economies of scale (technical economies (transport…
Chapter 19 - Mindmap
business costs
costs of operating factory can be compared with revenue to calculate whether the business made profit or loss
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fixed costs
management salaries, rent paid for property
even if output was 0, these costs still have to be paid
variable costs
material costs, piece-rate labour costs
the more units are produced, the higher these variable costs will be
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using cost data
setting prices
if average cost/unit is not known, business could charge a price that leads them to a loss being made each item sold
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economies of scale
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marketing economies
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advertising rates in papers and on television do not go up in the same proportion as the size of an advertisement ordered by the business.
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managerial economies
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larger companies can afford specialists and this increases efficiency and helps reduce their average costs
technical economies
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the use of flow production and the latest equipment will reduce the average costs fir the large manufacturing businesses
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drawing break even chart
fixed cost, variable cost, price per unit, maximum output
x-axis: number of units produced n sold, y-axis: money amounts, total cost line: variable+fixed, fixed cost don't change any level of output
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