Cost Analysis        

Cost Analysis

Cost Analysis

Miss Moe Pwint Lwin

Faculty: Mr. Amit Sharma

ECONOMICS ECO 301

Assignment 3


COST ANALYSIS OF NIKE

         People produce and sell goods for the profit they are getting out of the production. Business is only profitable when it covers the expenses of production and provides the increase in wealth of an investor(s) making the investments. Production is the output of business. Productivity takes this output, and measures it against the inputs used to create it. These inputs are the four factors of production-land, labor, capital and enterprise

Depending on the product they are selling, entrepreneurs need to choose the most efficient way to make their products. Their choice is influenced by the type of product they are making, and the output they require. Job Production occurs where a single product is made to customer requirements. This kind of production is best suited for making cars or airplanes. Batch production involves making similar items in set numbers such as fashion clothing. Mass production creates large numbers of identical, standardized products. This production method is suitable for business which produces daily consumable products. Just in time production reduces the costs of stockholding, by any delivery problem can halt all production. This is suitable when the product is bulky and a large storage space is needed for long term storage. For making sneakers like Nike, mass production is best suited since there is a large continuous demand.

Philip H Knight, the founder, started the Nike global corporation out of the trunk of his car in the early 1960’s in Oregon. His plan was to get high quality running shoes at a very low cost of products that would be created in Japan. In 1966, his first try sold $8,000 worth of shoes in no time and was ready for more. In 1971, it was sold over $1 million worth of shoes and the business became officially known as Nike. Nike originated from the name of the winged goddess of victory according to Greek Mythology. Now Nike is the largest sportswear supplier in the world, being the major American supplier of athletic shoes apparel and sports equipment.

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To start up a business, investment appraisal technique is used as attempts to measure the social costs and benefits of a project. It may be used for decisions such as location, purchasing factories or contract, purchasing equipment or rent or marketing campaign.  Assets are needed as requirement to start off the business and cash inflows must match their cash outflows for a business to survive. This is when it is break even where total revenue is the same as total costs. At this point the business is making neither a profit nor a loss. If this does not happen, ...

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