chart-increasing.png

Chart Increasing

Unit 1 - Introduction To Business Management - QB

briefcase.png

Briefcase

Unit 2 - Human Resource Management - QB

money-bag.png

Money Bag

Unit 3 - Finance & accounts - QB

direct-hit.png

Direct Hit

Unit 4 - Marketing - QB

factory.png

Factory

Unit 5 - Operations management - QB

bar-chart.png

Bar-Chart

Unit 6 - Assessment

<ul>
	<li>Scale of Operations: Size or volume of output a business produces.</li>
	<li>Economies of Scale: When average unit cost reduces as business size increases.</li>
	<li>Diseconomies of Scale: When average unit cost rises as business size increases.</li>
	<li>Efficiency: Measured in terms of costs of production per unit.</li>
</ul>

<ul>
	<li>
	Fixed Cost (FC): Doesn&#39;t change with production. Real-world Example: Monthly rent for a factory.
	</li>
	<li>
	Variable Cost (VC): Changes with production. Real-world Example: Raw materials like wood, metal springs, etc., for furniture manufacturing.
	</li>
	<li>
	Total Cost (TC): TC = FC + VC
	</li>
	<li>
	Average Cost (AC): AC = TC &divide; Quantity produced (Q)
	</li>
</ul>

<ul>
	<li>As a business produces more, fixed costs get spread over more units, reducing average costs.</li>
	<li>So, bigger business ➡️ lower average costs ➡️ more efficiency!</li>
</ul>

Imagine your business is a 🍪 cookie factory.

<ul>
	<li>Initially, as you bake more cookies, the cost per cookie drops. Why? The oven&#39;s cost (a fixed cost) is spread over more cookies. This is achieving economies of scale.</li>
	<li>But if you keep expanding, one oven isn&rsquo;t enough. You need a second oven or even a bigger bakery. Your rent and utilities double. Now, until you significantly increase your cookie production, the cost per cookie rises, resulting in diseconomies of scale.</li>
	<li>The sweet spot (pun intended!) where the cost per cookie is lowest? That&#39;s your optimum production level.</li>
</ul>

It&#39;s not just about making more cookies. If you can make the same cookies at a lower cost, you&#39;re being more efficient!

<ul>
	<li>Internal: Come from within the business. Think of this like upgrading your oven to bake cookies faster.</li>
	<li>External: Outside factors affecting many businesses. Like a sudden decrease in the price of chocolate chips because there&#39;s a surplus in the market!</li>
</ul>

Remember, always watch out for signs of inefficiency as your business grows. And, just like baking, the right ingredients in the right amounts lead to success! 🚀

Unit 1 - Introduction To Business Management - QB

Understanding Economies & Diseconomies of Scale in Business

Table of content

Key concepts 📌

Cost of production breakdown 📚

Economies of scale simplified 💡

Unlock the Full Content!

Unit 1 - Introduction To Business Management - QB

Understanding Economies & Diseconomies of Scale in Business

Table of content

Key concepts 📌

Cost of production breakdown 📚

Economies of scale simplified 💡

Unlock the Full Content!