๐๐ฎ๐๐ฒ ๐ฌ๐ผ๐ ๐๐ฎ๐น๐ฐ๐๐น๐ฎ๐๐ฒ๐ฑ ๐ฌ๐ผ๐๐ฟ ๐๐ผ๐๐๐ ๐๐ผ๐ฟ๐ฟ๐ฒ๐ฐ๐๐น๐?
Total Costs and Average Costs of providing your product/service to market
Before I discuss this topic, please note that since I am shifting some posts over this week to this newsletter from LinkedIn, you might get two emails or so each day. It should normalize to only one email/post daily, by Sunday! Thank you for your patience!
In the previous post, we discussed how to estimate the demand for your high-value tool (AI or SaaS) or service.
In this one, we will take a look at your potential costs of providing the product/service to your consumers.
Watch the video first and then read the explanation for the best understanding!
Costs consist of the payments that you make such as:
1. Rent (raw materials or space allocated),
2. Wages (labor),
3. Interest (paid on capital), and
4. Entrepreneurial profit (paid to CXOs and decision-makers)
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๐๐๐๐ ๐๐๐๐: "๐๐ฏ๐ต๐ณ๐ฆ๐ฑ๐ณ๐ฆ๐ฏ๐ฆ๐ถ๐ณ๐ช๐ข๐ญ ๐ฑ๐ณ๐ฐ๐ง๐ช๐ต" ๐ช๐ด ๐ข๐ฏ ๐ฆ๐ค๐ฐ๐ฏ๐ฐ๐ฎ๐ช๐ค๐ด ๐ต๐ฆ๐ณ๐ฎ ๐ข๐ฏ๐ฅ ๐ฅ๐ฐ๐ฆ๐ด ๐ฏ๐ฐ๐ต ๐ฎ๐ฆ๐ข๐ฏ ๐ต๐ฉ๐ฆ ๐ด๐ข๐ฎ๐ฆ ๐ต๐ฉ๐ช๐ฏ๐จ ๐ข๐ด ๐๐ณ๐ฐ๐ง๐ช๐ต (๐ต๐ฐ๐ต๐ข๐ญ ๐ณ๐ฆ๐ท๐ฆ๐ฏ๐ถ๐ฆ๐ด - ๐ต๐ฐ๐ต๐ข๐ญ ๐ค๐ฐ๐ด๐ต๐ด)
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Based on the quantities that we identified in the previous post; we need to calculate the Total Costs and Average Costs for each quantity that we are able/willing to supply.
The key quantities were: 70, 80, 100, and 130.
If the corresponding total costs are $2000, $2400, $3200, and $5000, calculate
Average Costs = Total Cost/Quantity.
Then the Average costs would be $28, $30, $32, and $38 per unit of product/service to you, the producer.
In a uniform pricing structure, it would make most sense to supply 70 units to the market because that quantity has the lowest Average Cost of $28.
๐๐ป ๐ฎ ๐๐ถ๐ฒ๐ฟ๐ฒ๐ฑ ๐ฝ๐ฟ๐ถ๐ฐ๐ถ๐ป๐ด ๐๐๐ฟ๐๐ฐ๐๐๐ฟ๐ฒ, ๐๐ผ๐ ๐๐ผ๐๐น๐ฑ ๐ป๐ฒ๐ฒ๐ฑ ๐๐ผ:
- stack the costs for the quantities supplied at each price
- identify how to minimize the total costs of all tiers combined
- recognize increasing complexity of data when stacking costs
- compare average and marginal costs more closely
- measure average and marginal revenues accurately
- restructure your resources, if required
๐ง๐๐๐ฅ: ๐๐ผ๐ป'๐ ๐น๐ผ๐๐ฒ ๐บ๐ผ๐ป๐ฒ๐ ๐ฏ๐ฒ๐ฐ๐ฎ๐๐๐ฒ ๐๐ผ๐ ๐ฑ๐ถ๐ฑ ๐ป๐ผ๐ ๐ฐ๐ฎ๐น๐ฐ๐๐น๐ฎ๐๐ฒ ๐ฐ๐ผ๐๐๐ ๐ณ๐ผ๐ฟ ๐๐ต๐ฒ ๐๐ถ๐ฒ๐ฟ๐ ๐ฐ๐ผ๐ฟ๐ฟ๐ฒ๐ฐ๐๐น๐, ๐ถ๐ป ๐ฎ ๐ฟ๐๐๐ต ๐๐ผ ๐๐ฐ๐ฎ๐น๐ฒ!
If you are worried about your costs:
I can analyze your complex data
I provide actionable and simplified solutions
I can save you from wasting your resources
DM me for more info!