Ch16. Costs, scale of production and break-even analysis

Which of the following costs do not include fixed costs?

• Costs that change in direct proportion to output

• Costs that do not change with output

• The total cost of producing the total output

• The cost of producing a single unit of output

Which of the following is the most likely reason why a business might not benefit from economies of scale?

• The business is a sole trader

• The business is labour-intensive

• The business is in the tertiary sector

• The business is capital intensive

When a business becomes too large, misscomunication between managers and workers is often a problem caused by ....

• diseconomies of scale

• trade unions

• economies of scale

• trades of scale

A company produces leather belts. The company needs to sell 2000 belts in order to achieve break-even. The company had an opening inventory of 700 belts. During the year they made another 5800 belts. At the end of 2015 they had a closing inventory of 500 belts. What was the margin of safety in 2015?

• 4000

• 2000

• 4650

• 1846

XYZ Ltd has produced the following cost information about Product X.

Raw material cost per 100 units: $230

Monthly fixed costs (based on 1000 units): $3500

What is the average cost of producing Product X?

• $5.80

• $2.30

• $3.50

• $37.30

Match each description to its economy of scale:

Reduction in average costs as a result of using flow production methods

• Technical economy of scale

• Financial economy of scale

• Purchasing economy of scale

• Managerial economy of scale

• Marketing economy of scale

Match each description to its economy of scale:

Reduction in average cost as a result of finding it easier and cheaper to borrow money from banks

• Technical economy of scale

• Financial economy of scale

• Purchasing economy of scale

• Managerial economy of scale

• Marketing economy of scale

Match each description to its economy of scale:

Reduction in average costs as a result of discounts received from suppliers

• Technical economy of scale

• Financial economy of scale

• Purchasing economy of scale

• Managerial economy of scale

• Marketing economy of scale

Match each description to its economy of scale:

Reduction in average costs as a result of employing specialist managers who improve business decision-making

• Technical economy of scale

• Financial economy of scale

• Purchasing economy of scale

• Managerial economy of scale

• Marketing economy of scale

Match each description to its economy of scale:

Reduction in average costs as a result of being able to sell more goods without needing to significantly increase promotional activities

• Technical economy of scale

• Financial economy of scale

• Purchasing economy of scale

• Managerial economy of scale

• Marketing economy of scale