GCSE Business Studies Economies of Scale Economies of Scale
Economies of Scale
Jan 04, 2016
Economies of Scale. As businesses grow they have higher costs but these costs can be spread over the large number of goods produced. 1 million pins may cost only 1p each to produce. 100 pins may cost 10p each to produce. marketing. purchasing. technical. financial. managerial. - PowerPoint PPT Presentation
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GC
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Economies of Scale
GC
SE B
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ness
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nom
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of
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leAs businesses grow they have higher costs but these costs can be spread over the large number of goods produced.
100 pins may cost 10p each to produce
1 million pins may
cost only 1p each to produce
GC
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leThis happens because businesses are able to cut the costs of all the items needed to produce goods. The main Economies of scale are:
purchasin
g
marketing
technical
financia
lmanagerial
Click one of the above to find out more…
GC
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purchasing
GC
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leA box of 24 tins of baked beans might cost a small retailer £9.60£9.60
40p TOTAL COST NUMBER OF TINS
= £9.60 24
Show hints
Show answer
HOW MUCH DOES EACH TIN COST?
GC
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20p
10 BOXES OF 24 TINS= ? TINS
TOTAL COST NUMBER OF TINS
= £48 240 Show hints
Show answers
HOW MUCH DOES EACH TIN COST?
240
GC
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leA lorry load of 10 pallets of boxes of tins baked beans might cost a large retailer £360£360
15p TOTAL COST NUMBER OF TINS
= £360 2400
10 PALLETS OF 10 BOXES
OF 24 TINS
HOW MUCH DOES EACH TIN COST?
Show hints
Show answers
2400
HOW MANY TINS?
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Review:
SMALL MEDIUM LARGE
NO OF TINS 24 240 2400
TOTAL COST £9.60 £48 £320
COST PER TIN 40p20p 15p
Fill table
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marketing
GC
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3p
TOTAL COST NUMBER OF FLYERS
= £30 1000
HOW MUCH DOES IT COST TO REACH EACH POSSIBLE CUSTOMER?
Show hints
Show answer
GC
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2p
= £40000 2000000
TOTAL COST NUMBER OF READERS
HOW MUCH DOES IT COST TO REACH EACH POSSIBLE CUSTOMER?
Show hints
Show answer
GC
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1p
TOTAL COST NUMBER OF READERS
= £50000 5000000
HOW MUCH DOES IT COST TO REACH EACH POSSIBLE CUSTOMER?
Show hints
Show answer
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BIGBIG firms can afford to advertise on
TV to reach a large number of customers. The cost can be spread amongst all the customers.
SMALLSMALL firms cannot!
Review:
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technical
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BIGBIG firms can afford to buy
expensive machinery and to build large factories to produce many goods. The cost can be spread amongst all the customers.
SMALLSMALL firms cannot!
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SMALL MEDIUM LARGE
COST £50,000 £80000 £120000
OUTPUT 200000 400000 800000
COST PER GOOD 25p 20p 15p
= COST OF MACHINE OUTPUT
Show hint
Show answer
Review:
GC
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financial
GC
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SMALL BUSINESSINTEREST
LARGE BUSINESSINTEREST
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• ManagerialManagerial– Use of specialists – accountants, marketing,
lawyers, production, human resources etc.
This means a high wages and salaries cost which can be spread over the large number of goods produced so the cost
added to each of these is small.
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