Chapter 19 - Naomi Ortiz

Question 1

State how is calculated the total cost

Answer 1

The total cost is the sum of the fixed and the variable cost.

Question 2

Define fixed costs and give 2 examples.

Answer 2

Are the costs that will not vary in the short-run, rent, wages

Question 3

Define variable costs and give 2 examples

Answer 3

Variable costs are the costs that vary according to the number of sales, like the raw materials and labor costs

Question 4

Outline the 5 economies of scale and explain briefly each one.

Answer 4

Purchasing economies
Marketing economies
Financial economies
Managerial economies
Technical economies

Question 5

Outline the 3 diseconomies of scale

Answer 5

Poor communication
Lack of commitment from employees
Weak coordination

Question 6

Outline the advantages of the break-even charts

Answer 6

A break-even chart is useful for studying the relationship between cost, volume, and profit.

Question 7

Why are economies of scale important?

Answer 7

Economies of scale are important because they can help provide businesses with a competitive advantage in their industry.

Question 8

State some limitations of the break-even chart

Answer 8

. Fixed cost is not always constant

. This graph doesn’t count that the sales may vary

Question 9

Write the total cost formula

Answer 9

Average cost per unit X output

Question 10

Explain how to calculate the average cost of production

Answer 10

Total costs of production / total output