Mario was thinking of starting the bakery business. Mario knows that the baking sector is characterized by many uncertainties and, at the same time, his decisions on prices, costs and production are fundamental for the survival of the company; must determine the pulse of the market. However, if he decides to work in another company, his choice will entail an opportunity cost. If Mario decides to go into the bakery business, he needs money to start his business. Total fixed cost Mario's first decision is to buy an oven. He reflects on this choice, there are many ovens on the market. There are ovens powered by electricity, ovens powered by gas (a combination of electricity and gas) or you can have the old wood-fired oven. To start with, he chose a small-type gas oven that can cost P40,000. The model powered by electricity and gas costs P500,000. Mario chooses the small gas oven, thinks about the depreciation of the equipment and the opportunity cost. The oven is a fixed input and its cost does not vary with the number of outputs produced. Now even if Mario uses or doesn't use the oven it depreciates. The depreciation cost is a fixed cost. Mario chooses the small gas-powered model that costs P40,000. This oven can bake 500 pieces of bread in an 8-hour operation. Fixed Cost Calculation The furnace depreciates over 20 years with no salvage value, so the depreciation cost is (1/20) (P40,000) P2,000/year. In one day of operation the fixed cost is P2,000/year x 1 year/365 days = P0.54Total variable costMario is thinking about the variable cost of running the business. It needs workers, bread-making tools, flour, lard, oil, water, sugar, baking powder and fuel. These items have a variable cooking cost that varies based on the quantity of bread produced. If… half of the paper… a huge reserve of spare parts, equipment and maintenance workers capable of fixing random equipment failures increases less than the increase in the size of the bakery. Maintenance costs are spread over a large production volume, thus reducing the average cost per unit. Enterprise-level economies, a situation where economies of scale occur due to a multi-product, multi-plant company. Achieving efficiency occurs through the reduction of delivery costs thanks to geographically dispersed multi-operational plants. Furthermore, the company can obtain a quantity discount in advertising media and can spread the fixed advertising costs over multiple units produced. It is also easier for large companies to engage in technological progress through their research and development (R&D) activities. They can spread the costs of purchasing expensive equipment and hiring research staff.