Livestock Economics, Marketing and Business Management

SHUT DOWN POINT

• Shut down point is the output level corresponding to minimum point of average variable cost.
• A farmer must produce at least this amount so that he will be able to cover the variable cost of production.
• If the total revenue curve goes below this point, it is better to close the business instead of incurring losses. So this point is called as Shut down point.
• Margin of Safety = Output – BEO

Particulars	Problem 1	Problem 2	Problem 3	Problem 4	Problem 5
Total Variable Cost	Rs.16,000		Rs.40,000	Rs.60,000	Rs.6
Total Cost	Rs,24,000	Rs.30,000	Rs.50,000		Rs.8,000
Total Fixed Cost		Rs.10,000		Rs.10,000
Milk Production	3,000 lts	3,500 lts
Gross Income	Rs.30,000	Rs.35,000	Rs.60,000	Rs.1,00,000
Meat Production			500 Kg.
Number of sheep				100	100
Service charge					Rs.15/unit