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You are launching a small business selling custom eco-friendly phone cases.

Key Points

1. Costs: You have fixed costs of $1,500 monthly and variable costs of $6 per case, with a selling price of $15.

2. Break-Even Calculation: To cover costs, you need to sell 167 cases.

3. Profit Calculation: To earn a profit of $1,500, you need to sell 334 cases.

4. Benefits of Break-Even Analysis: It helps you understand the number of sales needed to avoid losses, sets realistic goals, and assesses the sustainability of your business idea.

5. Limitations: Assumes constant selling prices, doesn't account for unexpected costs, and might not reflect varying market demands.

6. Economies of Scale: As you grow, you may save costs by buying materials in bulk or using better equipment.

7. Diseconomies of Scale: Challenges include communication issues and loss of control with a larger team.

8. Profitability with Growth: Growth doesn’t always lead to higher profits due to added management costs and complexity.

9. Usefulness for Large Businesses: Break-even analysis remains relevant for large firms to set targets and assess sales needs.

Conclusion

Understanding your break-even point and the factors affecting costs and profits is crucial for planning your business successfully.

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Answers for Part A

1) Break even point in units would be [fixed costs/(selling price - variable cost)]

Using the values [1500/(15-6)] = 167 units

2)To make a profit of 1500, I will use [1500+1500/(15-6)] = 334 units need to be sold

3)Break-even analysis calculates and determines the what is the minimum output required to not be in loss and how many products need to be sold to get profit. It allows for enhanced decision making such as setting the price of product, where is it able to reduce fixed costs and increase revenue, planning of how much output should be made, and act accordingly.

4)The limitations could be that analysing such critical data through the graphs may not be suitable. Also the graph is made considering that all output is sold, which is when considering realistically could be not possible to sell all output. Constructing the graphs can also be difficult and if wrong information is used due to human error, it can provide misleading data.

Answers for Part B

1)Financial Economies of Scale, and Purchasing Economies of scale

2)Communication diseconomies of scale where information is not passed on properly due to large internal structure leading to ineffective results and waste, Coordination diseconomies of scale where coordinating workforce in a large structure becomes difficult to control which results in poor productivity.

3)Growing bigger certainly is a big advantage in the business industry as expansion leads to higher sales leading to higher profits, benefits from economies of scale,

and lower risk of takeover. However expansion doesn't always guarantee in success and profitability. Expansion requires a great amount of capital, which can be costly and difficult to obtain and manage. Also even though they expand, if their customer base starts dropping due to competitors or reduced quality due to wanting to have more finance to expand, it can lead to lower sales which can be lead to a failure. In conclusion expanding the business doesn't always mean higher profitability. Expansion of the business should only be done with careful analysis and planning before proceeding.

4) Yes break-even analysis can still be helpful for large businesses. It allows a measurement of minimum output required to be safe from a loss and how much output is preferable to achieve profit. It will be much difficult to construct as the business is large and they will have many things to put in consideration and calculation. However it is beneficial as it will allow for more efficient decision making on whether to continue or stop producing a product, setting suitable price for products which is affordable by customers and can generate most profit. In conclusion it beneficial for large businesses to use break-even analysis. It allows for more better decision making which would benefit the business even more and allow them to act accordingly

P.S. Apologies and Thank you for allowing me to answer the questions late. As from my end these are my answers. The previous one can be deleted which is named as 'Mic and Aoy'.

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The break-even point is just the number of phone cases we need to sell in order to pay for both your fixed and variable costs — basically, when you're breaking even, making neither profit nor loss.

Here's the formula for calculating that:

Break-even point (units)
=
Fixed costs
Selling price per unit
−
Variable cost per unit
Break-even point (units)=
Selling price per unit−Variable cost per unit
Fixed costs

Fixed costs: $1,500

Variable cost per case: $6

Selling price per case: $15
​
=167 units
You’ll need to sell 167 phone cases to break even.

2. How Many Cases to Sell for a $1,500 Profit
Now, if you want to earn a profit of $1,500 on top of covering your costs, we just add the profit to the fixed costs and divide by the contribution margin (selling price minus variable cost):

Required units for profit
=
Fixed costs
+
Desired profit
Selling price per unit
−
Variable cost per unit
Required units for profit=
Selling price per unit−Variable cost per unit
Fixed costs+Desired profit
​

So, plugging in the numbers:

Fixed costs: $1,500

Desired profit: $1,500

Selling price per case: $15

Variable cost per case: $6

=334 units
Result: I'd need to sell 334 cases of phones in order to make $1,500 profit.

3. How Break-Even Analysis Helps a New Entrepreneur
Break-even analysis is super helpful when you're just starting out because it provides you with a clear indication of how many units you need to sell just to break even.

If our pricing works:
It will tell you whether your current selling price can cover your costs.

Establishing realistic targets: You'll know what your minimum sale targets must be in order to keep the business going.

How much risk: By knowing break-even, you can estimate the financial risks and make your decision accordingly.

Planning for expansion: We can make preparations in advance by understanding how fixed costs, manufacturing, and sales all work to contribute towards your overall profitability.

4. Limitations of Break-Even Analysis
Break-even analysis is a great tool, but it's not perfect. A few things to consider:

It's assumption-based: It makes assumptions that costs are fixed, but in reality, they can fluctuate. For example, your variable costs might increase when you grow, or you might have to drop your price to stay competitive.

It doesn't take into account everything: It doesn't take into account things such as market fluctuations, competition, or customer demand.

Fixed costs are not always fixed: As your business increases, you might be left with greater fixed costs (additional people, bigger room, etc.) that could change the break-even point.

Part B: Economies & Diseconomies of Scale
1. Two Types of Economies of Scale You Might Find
As your business expands, you might experience some of these benefits:

Lower per-unit cost: By investing in higher-quality equipment or buying materials in bulk, you can produce phone cases cheaper per unit.

Specialized labor: With more workers, you can now employ specialists, improving production process and product quality.

2. Two Possible Diseconomies of Scale
Conversely, as you grow, you might face higher costs as a result of

Coordination issues: The bigger you get, the harder it is to keep things running smoothly. More staff and increased production can mean more communications issues and slip-up.

Complexity of management: The larger your company is, the more complicated it is to manage people, stock, and operations. It can create inefficiencies or poor decision-making if not well handled.

3. Is Bigger Always More Profitable?
Not always. Growing your business doesn't always translate to more profit.

Scaling is expensive: The initial investment of equipment, staff, and real estate can be staggering. Until you can sell enough to start making back your money on them, you might actually lose money.

Market saturation: If the market becomes too full, or if you lose that personal connection with customers as you grow, bigger won't always be better.

Quality control: The bigger you get, the harder it is to maintain the same amount of quality. If the customers perceive that the quality has decreased, it will hurt your sales and reputation.

Growth, then, does not always equal profit — it's how you manage it.

4. Is Break-Even Analysis Helpful for Large-Scale Businesses?
Yes. Break-even analysis can still be useful for large-scale businesses. Here's why:

Facilitates decision-making: Even as a bigger company, break-even analysis can help in the evaluation of new projects, product offerings, or growth plans by demonstrating how many units you need to sell to break even.

Risk management: It helps you understand how cost or price fluctuations affect profitability, which becomes crucial when you have more extensive operations.

Benchmarking: Big companies can utilize it to compare various segments or divisions and determine where they are under- or over-performing.

Although bigger companies may have more data and complexity, break-even analysis still provides you with a quick, easy snapshot of if something is going to be financially feasible.

This is a sample answer for time being helped by ChatGPT. We shall provide our real answers when we get back home as it is very inconvenient to do the padlet work on the phone. Thank you for the waiting Ms

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Part A: Break-Even Analysis

1. Calculate your break-even point in units.

Formula:

Break-Even Points (units)= Fixed Costs ÷ Selling price - Variable Cost

Working:

1500/15-6 = 1500/9 = 167 units (rounded up)

So, you need to sell 167 phone cases to break even.

2. How many phone cases to earn a profit of $1,500 in a month?

Formula:

Required units = Fixed Cost + Desired Cost ÷ Selling Price - Variable Cost

Working:

1500 + 1500/9 = 3000/9 = 334 units

You must sell 334 phone cases to earn a $1,500 profit in a month.

3. In what ways is break-even analysis helpful for a new entrepreneur like yourself?

Break-even analysis helps entrepreneurs:

Understand how many units they need to sell to avoid losses.

Set sales targets and pricing strategies.

Decide whether the business idea is financially viable.

Identify how changes in cost or price affect profitability.

4. What are the limitations of break-even analysis when applied in real-life business situations?

Limitations include:

It assumes all units produced are sold (no wastage or stock).

Fixed and variable costs may change over time.

It doesn’t account for market conditions or unexpected costs.

Assumes a single product or constant product mix.

Part B: Economies & Diseconomies of Scale

5. What are two types of economies of scale you might experience?

(a) Purchasing Economies:
Buying raw materials in bulk at a discount reduces per-unit costs.

(b) Technical Economies:
Using better machinery increases efficiency and lowers production cost per unit.

6. What are two possible diseconomies of scale you might face as your business expands?

(a) Communication Breakdown:
As the business grows, communication may become harder, slowing down decision-making.

(b) Management Inefficiencies:
Larger businesses can face coordination issues, making it harder to control costs and employees.

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Scenario Summary

You're starting a small business selling custom-designed eco-friendly phone cases. Your estimated costs and prices are:

Fixed costs/month = $1,500

Variable cost/unit = $6

Selling price/unit = $15

Part A: Break-Even Analysis

1. Calculate your break-even point in units.

You need to sell 167 phone cases to break even.

2. How many phone cases would you need to sell to earn a profit of $1,500 in a month?

So, you need to sell 334 units to make a $1,500 profit in a month.

3. In what ways is break-even analysis helpful for a new business?

Break-even analysis helps new businesses:

Understand how many products they must sell before making a profit.

Set realistic sales targets.

Make pricing and cost decisions more confidently.

Minimize financial risks by planning better.

4. What are the limitations of break-even analysis when applied in real-life business situations?

It assumes all products are sold at the same price.

It doesn't consider changes in costs or demand.

It ignores unexpected events like economic downturns or supply issues.

It’s only a prediction — not 100% accurate.

Part B: Economies & Diseconomies of Scale

5. As your business grows, what are two types of economies of scale you might experience?

1. Purchasing economies – buying materials in bulk at a cheaper cost.

2. Managerial economies – hiring specialists (like marketing experts) to improve efficiency.

6. What are two possible diseconomies of scale you might face as your business expands?

1. Communication problems – with more staff, it’s harder to pass information quickly.

2. Lack of motivation – workers may feel less important in a bigger company, which can reduce productivity.

7. Do you think growing bigger always means being more profitable? Why or why not?

Not always. Bigger businesses can enjoy lower costs per unit, but they also face higher risks, more competition, and possible diseconomies of scale. Poor management or over-expansion can actually reduce profits.

8. Can break-even analysis still be useful for large businesses? Explain with reasons.

Yes, it can. Even large businesses use break-even analysis toassess new products or projects.plan pricing and costs. Make better financial decisions. It gives a quick estimate of risk and helps with budgeting, even at a bigger scale.

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CLASSWORK: 14/7/2025

Scenario:

You are launching your own small business selling custom-designed eco-friendly phone cases.
At the start, you estimate:

Fixed costs per month = $1,500

Variable cost per phone case = $6

Selling price per phone case = $15

After your initial success, you consider expanding your production by investing in better equipment and hiring more staff to benefit from economies of scale.

Part A: Break-Even Analysis

1. Calculate your break-even point in units.
(Show your formula and full working.)

2. How many phone cases would you need to sell to earn a profit of $1,500 in a month?

3. In what ways is break-even analysis helpful for a new entrepreneur like yourself?

4. What are the limitations of break-even analysis when applied in real-life business situations?

Part B: Economies & Diseconomies of Scale

5. As your business grows, what are two types of economies of scale you might experience?

6. What are two possible diseconomies of scale you might face as your business expands?

7. Do you think growing bigger always means being more profitable? Why or why not?

8. Can break-even analysis still be useful for large businesses? Explain with reasons.

Respond to at least one classmate’s post with constructive feedback or your own perspective.

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Alright let's keep it simple.

GST (Good & Service Tax) 6%

SST (Sales & Service Tax) 5-10%

Both GST and SST are beneficial for Malaysia, but they also have some cons.

GST is a broad tax that covers most of the goods and services, applying 6% from manufacturer, to wholesale, and retailer/services. This helps the government to earn more stable income, and it is fair to everyone pays. The ugly truth behind GST is that it made daily goods more expensive, which could be a huge impact on Malaysians, especially to small businesses, they will find it hard to manage their business.

SST is simpler and easier to manage, it only taxes certain goods and services, this makes consumer feel easy in everyday spending. It's more friendly to small business too. SST are usually applicable to imported goods like expensive and luxury goods. Example: King Crab, Caviar, Salmon, Avocado, Lobster and etc. They won't apply on normal goods like mud crab, flower crab, cods, rambutan, and etc.

The cons are that it collects less money for the government and can still cause hidden extra charges because it’s not claimable like GST. It’s less efficient, but more acceptable to the public.

Which one would I choose?

I would pick GST, because it is better for long-term and it is honestly fair in taxation. Sadly, they disbanded GST and replace with SST, but SST isn't that bad either, because it simpler and less controversial for Malaysians to accept.

Never mind this explanation ain't simple :/

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hi okay so today is 1/7/2025 and i am supposed to be talking about gst and sst idk wait let me check, yea okay so QUESTION: AFTER WATCHING THE VIDEO, LET ME KNOW WHAT YOUR OPINION IS ON GST AND SST? ANSWER: GST and SST have both pros and cons, they are both contradicting each other and some can be more convenient than the other depending on the state of the economy, it really depends on the state of the economy, for SST, the tax is only applied post manufacturing and while purchasing the product, this can be good when the government does not rely heavily on tax income if the economy is at it's peak. Let's say the economy is in recession, the government will rely on high tax rates, therefore inputting GST, which is tax applied in every stage of production and product selling until it reaches the government hands, it has a fixed rate going on for 6% and can build up cost of a product further from it's original price, which means the government is taking in more tax. Unfortunately, I do not fully understand the concept, I can at least say that I would prefer SST as a citizen so it doesn't puncture my wallet as bad as GST would, however, it is open to interpretation of many perspectives, I digress. did i say it right i think i did i think ik what im talking abt suiii

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GST is better for the economy and brings in more earnings, but people dislike it more because it’s charged at every stage. SST is less complicated and feels easier for consumers, but it's less efficient. If managed well, GST is the better choice for long term. :)

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Q. After watching the video, let me know what is your opinion on GST and SST?

1/7/2025

Both methods have their pros and cons and surely with their own scandals too. Looking at our current SST increase from 6% to 8% on selected goods doesn't seem very overwhelming. We need to take in consideration the economic revenue being generated in order to pay off the country's debts and for the betterment of the people. However if the government were in tough times and need more revenue to be generated, GST can be introduced. However it should be operated efficiently to lower down final costs for the consumer. If this measure is not taken place when GST returns, the people would be having a tougher time due to the increased prices, not to mention our current global crises has already led to a price increase in goods. In my opinion, if the government can ensure GST will be operated efficiently, they can opt to shift to it. If that seems very difficult to manage, they should stick to the current SST. Whatever decision takes place, it should not affect the wellbeing of the people.

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After watching the video, let me know what is your opinion on GST and SST?

1/7/2025

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The Ugly Truth About Malaysia’s Tax System

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1. As a sole trader, it's easier to set up businesses, the sole trader gets to keep all of the profit and they get to make all of the decisions and has complete control in the business. However as a sole trader, they have unlimited liability so they are responsible for business debts, they may not be able to raise funds to expand the business, they may not have business skills to run a business and it is difficult to compete with larger rival firms.

Setting up a private limited company is more convenient as it is owned by shareholders who have limited liability so they only risk losing the value of their shares which is the amount of money they have invested in the company, the business continues regardless of the lack of shareholders, the company can raise funds by selling shares and the profit is shared between the shareholders through the payment of dividends which is a payment out of profits to shareholders as a reward for the investments. However the sales of shares by the company must only be sold privately often to family members, friends or employees, it's often difficult to sell the shares by shareholders as it must be sold privately and with the agreement of other shareholders and only one shareholder may own 51% of the shares in the company and so has control over major decisions. I would recommend owning a private limited company, as it's safer and less complex to own long term over a sole trader.

2. Market research is the process of collecting, recording and analysing data about the customers, competitors and market for a product. Market research is important to find out what consumers like and dislike about its products, it's also beneficial to identify consumer tastes and a preferrences, it's also able to decide on the best promotion, packaging and distribution methods for it's products and it's also able to identify the main competitors and what is special about their products - this is known as unique selling point which is known as a special feature of a product that sets is apart from it's competitors' products. Bad market research could lead to promoting the wrong product to customers which could lead to competitors having an advantage in the market, which will lead to a decrease in sales and not having a good brand image therefore the business may fail.

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A sole trader is where you get to keep full control of the business,and keep the profits incoming,get to work when you want.The disadvantage is the business will end if the owner dies and lack of skills because just you one person can't always give the best idea.In private limited company more people are involved to help in the business, and business continues even if the owner is dead. The disadvantages are , it is expensive and cost a lot,must share profits with shareholders which may sometimes conflict might happen,and less privacy.I would choose sole trader because its easy to start and run it,and your the person that you trust keep the profits. But if you want fast growth then private limited company is better.

2. Market research is important before launching a new product because you get to know about what the customers prefer , set the right price , reduce the risk of the fall of your business. Example a bad market research could lead to : A company launches short sleeve shirts where most people don't wear them.

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Question 1.
(Sole Trader)

Advantages:

1. Full control (owner take full control over profit and decision)

2. More flexibility (simple to make changes or stop the business)

3. Simple and cheap to startup

Disadvantages:

1. Unlimited liability (the owner is personally responsible for all debts)

2. Less credibility (may appear less trustworthy to clients and suppliers.)

3. Less privacy (financial info is publicly available)

(Private Limited Company [Ltd.])

Advantages:

1. Limited liability (personal assets are protected if the business fails.)

2. Better public image (will be seen as reliable and professional)

3. More opportunities to raise money

(through selling shares or loans)

Disadvantages:

1. More expensive and complex to set up (must register and follow strict rules.)

2. Profits are taxed separately (corporation tax plus potential income tax on dividends.)

3. Less privacy (financial info is publicly available)

Which one will I recommend??

I don't know bro 🤷 (I'm joking lol)

Answer: It actually depends on what is the friend's goal. If your friend is a starter and just start up a business, and wants to keep it real simple, and the financial is low (poor asf), then being a sole trader is the better choice.

BUTT 🍑🥵, if your friend plans to grow the business, and wants to protect their personal assets, or want to attract investors, then private limited company ltd. would be a smart choice.

My recommendation:

If the business has big potential and involves any risk, go with the private limited company. It offers more protection and looks more professional.

Question 2.
Market Research is important before launching a new product because it helps the business understand what the customer wants, how much they are willing to pay, who the target market is, and what will the competition look like. Without Market Research, the company will risk creating a product that no one needs or wants.

Example:

Nathan's company is selling football products and it's all about Cristiano Ronaldo and Portugal football jersey in Brazil, BUT HIS BUSINESS FAIL, you know why?

Although his products were very good and have really good quality, but no one in Brazil won't buy his product and about his products

Yeah, his business won't be successful because he failed to meet the wants and needs from the customers because they are from Brazil and not Portugal, they aren't willing to pay, no competition and no target market.

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1.A sole trader is someone who starts a business by themselves, as a sole trader it will be easier for them to form their own business. The sole trader makes all of the decisions by themselves which means they has complete control over the business. But in the same time, Owner will have unlimited liability for the debts of the business and owner may have the risk of losing their personal wealth to pay for these. Since sole trader is an individual business, the business may not be able to raise funds to expand their business. They may also need to work in a longer period of time compare to other businesses. For private limited company, they are usually own by a small number of shareholders, and it's often members of their family members or friends. In private limited company, they can only sales their sale of share by the company privately, but for sales of shares by shareholders, it's often difficult to sell as must be sold privately and the agreement of other shareholders. And also even if the business went successfully, it may be difficult to raise additional capital as shares cannot be sold to the general public. I would recommend sole trader due to owner have the full control over the business and it's often quicker and easier to set up a business.

2. Doing market research before launching a product will helps you in identify consumer needs. This reduces the risk when developing and launching new products, because the products have been designed and produced based on the market research information provided by potential consumer of product. The company will be able to decide on how the prices and promote the products, most importantly what's the best way to distribute the product to customer. However, They will be able to predict how changes and trends in consumer tastes and fashion may affect the future demand for the products, for example, nowadays people likes to buy a design with lot's of different memes on their shirt, and if a company didn't do their market research properly, and design a very outdated shirt with a high prices, they may not be able to attract customer, they may even lose customer loyalty towards that business.

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1. Being a sole trader is suitable for operation of a small business. The business management is done by one person. The benefits of this is that the person will have full control over their business, flexible working times for them, and all profit generated belongs to them. However it can be very exhausting for one person to manage a whole business by himself and the person has unlimited liability. Plus its difficult to raise finance as its a small one-person business. A Private limited company on the otherhand is suitable for big business and will be suitable is the friend wants to become a big company. The benefits are that Private limited company provides greater access to finance compared to Sole Trader and shareholders have limited liability. However the downsides are that Private limited company only sells shares to private group of people, which means their access to greater finance is limited. The cost of setting up a limited company is also costly. Considering the above, the friend should evaluate the type and size of his/her business and come up with his/her conclusion. It's difficult for me to justify a recommendation without knowing about the friend's business idea.

2. The economic and demographic wants vary periodically over time. Conducting market research before the development of a product is crucial. It identifies current consumer wants and what likely would attract them. This would lead to the development of a product that has a high chance of success when launched. If improper market research is done, the new product that will be launched may not tailor to customer wants and hence would lead to low sales as customers will not buy it. This would be a big waste and cost increase for the business as the cost of market research has gone futile and due to low sales, less revenue and profit will be generated. This can lead the business to a big failure due to heavy cash outflow but less cash inflow.

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1. If your friend wants something simple and low-cost, go with sole trader. They’ll have full control but risk personal loss. For more safety and growth potential, a private limited company is better, though it’s more complex.

2. Market research matters because it helps you know what people actually want. It saves time, money, and helps you avoid launching something no one needs. Poor market research can lead to business failure because a company might launch a product that people doesn't want or need. Without knowing what the customers need or want, the product might not be up to what the customer expects. For example (too expensive, bad advertising or giving features that no one wants. This can lead to a decrease in sales, wasted money and can destroy the brand's image.

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1. A sole trader is easy and cheap to set up. The owner keeps all the profits and has full control of the business. However, the owner might has unlimited liability. It will be harder for the business to raise money, and the business may stop if the owner leaves. Overall, a private limited company offers limited liability, so the owner's capital can be protected. It is easier to raise funds, and the business can continue if the owner leaves. However, the owner needs to share profits and the control of the business with others. I would highly recommend a private limited company because it is safer and better for long-term growth business.

2. Market research is important before launching a new product due to it helps a business to understand what customers want and need in the market. This may reduces the risk of failure. If a company sells its product in a country without doing research, people might not buy them, and the business could fail.

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1. A friend wants to start a business and is choosing between being a sole trader or forming a private limited company. What are the advantages and disadvantages of each option? Which would you recommend and why?

2. Why is market research important before launching a new product? Give one example of how bad market research could lead to business failure.