Costs, Scale of Production and Break-Even Analysis: Textbook, Chapter 18 (PG 222-234)

COSTS, SCALE OF
PRODUCTION AND
BREAK-EVEN
ANALYSIS
Textbook, Chapter 18 [pg 222-234]
Name: ……………………………………………
Class: ……………
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Learning outcomes:
• Explain why managers need to know the costs of operating their
busines.
• Identify different types of costs.
• Explain the concept of economies of scale and diseconomies of scale.
• Explain, interpret and use a simple break-even chart:
a) the concept of break-even chart.
b) construct, complete or amend a simple break-even chart.
c) interpret a given chart and use it to analyse a situation.
d) use a chart to help make simple decision, eg: impact of higher
price.
e) identify the limitations of break-even charts.


Key points:
Fixed costs or overhead cost

____________________________________________________
____________________________________________________
Variable costs_________________________________________
____________________________________________________
Total costs___________________________________________
Average costs_________________________________________


Economies of scale and diseconomies of scale

Key points:
Economies of scale____________________________________
____________________________________________________
Economies of scale
1) P__________ e______________
Explanation: _________________________________________________
____________________________________________________________
____________________________________________________________
2) M__________ e______________
Explanation: _________________________________________________
____________________________________________________________
____________________________________________________________

3) F__________ e______________
Explanation: _________________________________________________
____________________________________________________________
____________________________________________________________



4) M__________ e______________
Explanation: _________________________________________________
____________________________________________________________
____________________________________________________________
5) T__________ e______________
Explanation: _________________________________________________
____________________________________________________________
____________________________________________________________
Diseonomies of scale
1) P__________ c_____________
Explanation: _________________________________________________
____________________________________________________________
____________________________________________________________
2) L______ m __________
Explanation: _________________________________________________
____________________________________________________________
____________________________________________________________
3) S_______ d__________ m_________
Explanation: _________________________________________________
____________________________________________________________
____________________________________________________________


Break-even charts: Comparing costs with revenue

Key points:
Break-even level of output_______________________________

____________________________________________________
Break-even charts_____________________________________
____________________________________________________
Revenue_____________________________________________
Break-even point______________________________________
____________________________________________________


Advantages of break-even charts

1) Manager able to know the e_________ profit or loss to be
made at any level of output.
2) To know the impact of the profit and loss when changes of

selling price.
3) To show the s_______ margin.
Limitations of break-even charts
1) Assuming all goods produced by the firms are actually s_____.
2) F_____ costs remain constant.
3) Break-even charts only concentrate on the break-even point of

production. There are still many other aspects of the o_______ of
business need to be a________.
4) The break-even chart only assume that all costs and revenues
can be drawn with s__________ line.


Costs, Scale of Production and Break-Even Analysis: Textbook, Chapter 18 (PG 222-234)

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Costs, Scale of Production and Break-Even Analysis: Textbook, Chapter 18 (PG 222-234)

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Textbook, Chapter 18 [pg 222-234]

This example is downloaded from www.mybusinessstudies.com. A comprehensive 1

This example is downloaded from www.mybusinessstudies.com. A comprehensive 2

Fixed costs or overhead cost

This example is downloaded from www.mybusinessstudies.com. A comprehensive 3

Economies of scale and diseconomies of scale

This example is downloaded from www.mybusinessstudies.com. A comprehensive 4

3) S_ d m_____

This example is downloaded from www.mybusinessstudies.com. A comprehensive 5

Break-even charts: Comparing costs with revenue

Break-even level of output_______________________________

This example is downloaded from www.mybusinessstudies.com. A comprehensive 6

Advantages of break-even charts

2) To know the impact of the profit and loss when changes of

3) To show the s_______ margin.

Limitations of break-even charts

1) Assuming all goods produced by the firms are actually s_____.

2) F_____ costs remain constant.

3) Break-even charts only concentrate on the break-even point of

This example is downloaded from www.mybusinessstudies.com. A comprehensive 7

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