Beruflich Dokumente
Kultur Dokumente
1. Calculate the cost of a skateboard if the total fixed costs are $30,000 and variable costs
are $60,000 to produce 1,500 skateboard.
2. What is the profit per skateboard, if the sales price is $120 per skateboard?
3. Extension activity: What is the break-even point if the sales price is $120 per skateboard (i.e.
how many skateboards do I need to produce to have a $0 loss)?
= $30,000/$80
=375 unit
I.e. 375 units need to be sold before a profit is made.
Provide a definition:
The cost per unit of output is lower due to operating on a larger scale. When a lot is
produced, a unit is produced more cheaply.
At some point of increased production volume the fixed cost will increased due to increased
employees, additional equipment, increased facility needs, etc.
‘In economics, a cost curve is a graph of the costs of production as a function of total quantity
produced. In a free market economy, productively efficient firms use these curves to find the
optimal point of production (minimising cost), and profit maximising firms can use them to decide
output quantities to achieve those aims. There are various types of cost curves, all related to each
other, including total and average cost curves, and marginal ("for each additional unit") cost
curves, which are equal to the differential of the total cost curves. Some are applicable to
the short run, others to the long run’. (Wikipedia: https://en.wikipedia.org/wiki/Cost_curve)
Saving money, bulk buying result into lower input cost (e.g. Material), Lower energy input cost,
Lower cost of finance, lower cost of transport (e.g. transporting one unit is much more expensive
than transporting a 1000 items that can all share the cost), lower advertising cost
Multiple choice:
Economies of scale can lead to increased profits for large companies because:
a. They can do competitive deals on their advertising
b. They can buy inputs for their production processes more cheaply
c. They can afford to undertake extensive research on markets and products
d. All of the above
Answer: D