Module 2 – SLP

PRODUCTION AND COSTS

For Module 1, you did research on consumer demand and pricing for your business idea. Continue with the same business idea that you wrote about for Module 1, but now look at the cost side of your business.

Do some research on various potential start-up expenses for your business based on research on wages, office space rental rates, etc., in your home town. More specifically, write a three-page paper answering the following questions:

1. What do you think the main expenses will be for your business? Make sure to discuss labor, rent, equipment, and any other major expense you can think of.
2. Do some research on the internet or from your own personal contacts to get a ballpark estimate of how much the specific expenses are in your home town for the items that you listed in your answer to Question 1 above. You can use Craig’s List or similar webpages to get an idea about wages for different positions that you may need to hire for, and there are many webpages that have advertisements for renting commercial property in different parts of the country.
3. Finally, break down your expenses into fixed plus variable costs. Make sure to cite two of the required background readings as justification for your classifications of your different expenses into the fixed and variable cost categories.
   Module 2 – Background
   

   PRODUCTION AND COSTS

   Required Reading

   To start off this module, watch the following videos which will give you an introduction to some of the main concepts for this module. Pay special attention to the discussion about fixed versus variable costs and accounting versus economic profit:Clifford, J., & Hill. J. (2016). Revenues, profits, and price. CrashCourse. https://www.youtube.com/watch?v=UWImfFax8EwThe following book will give you a relatively simple introduction to the key concepts covered in the module. In addition to the concepts, make sure to go carefully through the numerical examples. Read Chapter 7 of the following book (use the “Contents” tab to navigate though Sections 7.1, 7.2., and 7.3):Taylor, T. (2014) Principles of Microeconomics. OpenStax College. http://cnx.org/contents/6i8iXmBj@11.2:75YRzeYw@8/Introduction-to-Cost-and-IndusNow go to this slightly more advanced book chapter that will cover the concepts from this module from the point of view of a business manager. Pay special attention to the tables and numerical examples:Marburger, D. R., & Peterson, R. (2013). Chapter 4: What your cost accountant can’t measure: The economic theory of production and costs. Economic Decision Making Using Cost Data: A Manager’s Guide. New York, NY: Business Expert Press. [EBSCO eBook Collection. Note: to find the book enter only the title of the book in the library search engine]