Overview
Understanding cost changes and production levels is vital for businesses to thrive. Fixed and variable costs play a significant role in determining how much a company can produce and at what price. By analyzing these costs, businesses can make informed decisions that enhance profitability and effici...
Key Terms
Example: Rent for factory space remains the same regardless of how many products are made.
Example: Raw materials costs increase as more products are produced.
Example: If producing 100 units costs $1,000 and 101 units cost $1,005, the marginal cost is $5.
Example: A factory producing 10,000 units may have a lower cost per unit than one producing 1,000 units.
Example: Adjusting production schedules based on seasonal demand.
Example: A company needs to sell 500 units to cover all its costs.