Costs and Break-even Analysis
Business costs and break-even analysis
All businesses involve costs. Managers need to know the costs in order to calculate the revenue and to decide what price should be charged for the product. Then, by using the break-even analysis, safety margin can be determined. This is the minimum output needs to be produced in order to break-even.
There is a relationship between business costs and break-even analysis. There are two types of costs: Fixed costs and variable costs. In order to find the break-even, total costs=Total revenue.
These Business Studies revision slides are based on the Textbook: Business Studies (Fourth Edition) by Karen Borrington and Peter Stimpson.
This chapter will explain:
- Different types of costs.
- The difference between economies of scale and diseconomies of scale.
- Why do we need the break-even analysis?