Discuss the implications of increased output on EOS and DOS within a firm.

As output increases it is a general rule that cost decreases, but why is this? Let's look at the principle of EOS and how they reduce costs. Starting with Technical EOS, here you have one fixed cost for the cost of the equipment. Let's use and oven as an example. The greater the output means the further the fixed cost is spread meaning it costs less per item. This is a similar concept to managerial EOS for example. Thinking about Purchasing EOS however, we can see that the cost for raw materials decreases with an increase in quantity. Therefore, the greater the output on a firm means the more they need to purchase in, therefor the cheaper each item is, again reducing costs. Now thinking about diseconomies of scale. There are three main causes here, breakdown, communication and demotivation. We see that if machines or tools are over used they can lead to breakdown, this increases costs. Likewise, the larger output the harder it is for effective communication which often results in mistakes and poor efficiency - leading to greater costs.