Bus 1103 Unit 5 Cost Of Production

BUS 1103 Unit 5 - WRITTEN ASSIGNMENT Costs of Production 1
Title: Costs of Production
Student Name: Mike Cheelo
Course: BUS 1103 – Unit 5
Date: 10th December 2016
Instructor: Fernando Franco
Explicit costs are costs paid by the company such as rentals and wages. These are costs paid for by a company from its financial resources. Implicit costs are an opportunity cost resulting from a company making savings like using your own premises to conduct business and generating the company’s power sources away from the paid national grid like wind and solar. Profit = total revenue – total costs
An accounting profit is a calculated profit from the company’s revenue less its operational costs. The operational costs will only be from explicit costs as defined above.
An economic

Economies of scale are cost savings from the decreasing marginal costs for every unit of the product that is produced. Economies of scale will reduce the average cost of production as company grows in size. Diseconomies of scale will mostly be incurred by the company when the marginal costs of producing an additional unit of a product exceed the optimal level and start to increase. Diseconomies of scale are synonymous with the difficult of managing companies that are too large. The average and marginal costs of production will start to increase when a company is experiencing diseconomies of scale.
The first example is comparison between a large retail chain that runs a huge warehouse and a small retail outlet that has a small storage space. The large retail chain store will enjoy economies of scale due to reduced storage average costs while a small retail shop will