EIO 5200 Module 1 Written Assignment: Costs, Break-Even and When to Add Capacity Example

Reviewed by Edgar Pennington, MBA Thomas Edison State University Updated October 2026

This EIO 5200 Module 1 example answers the first written assignment in Economic Issues in Organizations, a core course in TESU's Master of Science in Management. EIO-5200 opens with the foundations of strategy, the cost, revenue and profit concepts on which every later decision rests, and asks students to apply them to a real decision rather than define them. Its case is an invented house-call vet practice for Ocean County that would treat pets at home from a fitted-out van. It separates the practice's fixed and variable costs, computes the contribution of each visit and the break-even volume, follows average cost as visits rise and asks whether a second van would lower cost per visit or only add risk.

CourseEIO-5200 Economic Issues in Organizations
ModuleModule 1
Paper typeWritten assignment 1: the foundations of strategy, costs and economies of scale
LengthAbout 562 words, 5 pages
FormatAPA 7 student paper
SchoolThomas Edison State University
ProgramMaster of Science in Management
UpdatedOctober 2026

Free sample paper for EIO 5200 Module 1

1

One Van or Two? Costs, Break-Even and Scale for a Mobile Veterinary Practice

Student Name

Master of Science in Management, Thomas Edison State University

EIO-5200: Economic Issues in Organizations

Mentor Name

Month Day, Year

What this page is doingThe title poses the capacity decision the paper answers, using the cost concepts of the module. The practice and its figures are a composite.
2

One Van or Two? Costs, Break-Even and Scale for a Mobile Veterinary Practice

Costs of One Van

Fixed costs do not change with the number of visits within the van's capacity of about eight a day, or 1,840 a year over 230 working days. Each visit contributes $260 minus $58.80, or $201.20, toward them.

Annual cost, one vanAmount
Van, outfitted, financed over five years$38,000
Insurance, licensing and practice software$14,000
Veterinarian, salary and benefits$165,000
Veterinary technician$52,000
Total fixed cost$269,000
Variable cost per visit: supplies and drugs $42, fuel $9, card fees $7.80$58.80
Average revenue per visit$260

Break-Even and Average Cost

Break-even volume is fixed cost divided by contribution per visit: $269,000 / $201.20, about 1,337 visits a year, or 5.8 a day. Average cost per visit, fixed cost spread over visits plus the variable cost, falls steeply as volume rises: $283 at 1,200 visits, $260 at break-even and $205 at full capacity. At capacity, the van earns about $101,000 a year. Besanko et al. (2017) describe this pattern, spreading indivisible fixed costs over more output, as the most common source of economies of scale.

The same logic explains why scale economies have limits. Panzar and Willig (1977) showed that a firm enjoys economies of scale only over the range of output where spreading fixed costs outweighs any rise in other costs; for a single van that range ends at its capacity of about eight visits a day, where serving more clients requires a second set of fixed costs.

What this page is doingShowing average cost at three volumes, rather than stating that it falls, lets the reader see where the scale economies are and where they run out.
3

Would a Second Van Lower Costs?

A second van brings $265,000 of new fixed cost and requires a dispatcher, $45,000, to schedule both. Buying supplies for two vans earns an 8 percent discount, cutting variable cost to $55.44, and a dispatcher who handles calls and routing lets each veterinarian see nine pets a day instead of eight, raising capacity to 4,140 visits.

At full use, the two-van practice has a lower average cost, $195 against $205, so modest economies of scale exist. They come from purchasing, routing and the dispatcher's effect on each veterinarian's time, not from the main cost, the veterinarian, which doubles with the second van. In professional services, Besanko et al. (2017) note, the minimum efficient scale is often reached early because skilled labor does not get cheaper per unit as a firm grows.

The second van only beats one van once demand passes about 3,325 visits a year, roughly 14 a day, and it loses money below 2,830. The decision therefore turns on demand, not cost. The practice should open with one van, keep a record of every request it turns away and add the second van once the first is full and the waiting list points to at least 1,500 more visits a year.

Annual visitsOne van: profitTwo vans: profitTwo vans: average cost
1,840$101,208-$202,610$370
2,830$101,208about $0$260
3,325$101,208$101,162$230
4,140$101,208$267,878$195

Conclusion

The cost structure is mostly fixed, which makes volume the key to profit and a slow start dangerous. Chandler (1990) showed that the great scale economies of industrial firms came from investments that only paid when throughput was high; the same discipline, on a far smaller scale, applies to a van. Economies of scale exist but are small, so growth should follow proven demand rather than lead it.

References

Besanko, D., Dranove, D., Shanley, M., & Schaefer, S. (2017). Economics of strategy (7th ed.). Wiley.

Chandler, A. D., Jr. (1990). Scale and scope: The dynamics of industrial capitalism. Harvard University Press.

Panzar, J. C., & Willig, R. D. (1977). Economies of scale in multi-output production. Quarterly Journal of Economics, 91(3), 481-493. https://doi.org/10.2307/1885979

What the EIO 5200 Module 1 instructions ask for

The three EIO-5200 papers carry 40 percent between them. Each is two to three pages, 500 to 750 words, on the module's ideas, with outside sources welcome if cited in APA. The first falls in Module 1, The Foundations of Strategy, whose objectives cover cost, revenue, profitability and profit maximization, economies of scale and cost-benefit decisions. Expect to separate fixed from variable costs, compute contribution and break-even, follow average cost as output changes and judge whether adding capacity makes sense. The practice here is a composite built for this sample. Questions in this module often give cost data and ask for a recommendation, so plan to end with a clear decision.

How this EIO 5200 Module 1 example is built

The paper puts the one-van cost structure in a single table and states capacity before any calculation. The break-even section computes volume, then shows average cost at three outputs and links the pattern to the textbook's account of indivisible fixed costs. The second-van section sets out what changes, new fixed cost, a purchasing discount and more visits per day, and compares profit and average cost at four demand levels. It explains where the scale economies come from and why they are small, then states a decision rule tied to measurable demand. A two-sentence conclusion draws the strategy lesson. Two research sources, on the limits of scale economies and on throughput, support the textbook's account.

EIO 5200 Module 1 rubric: what earns full marks

The van practice's cost paper is judged on whether fixed and variable costs are sorted correctly and the break-even visits are right. Mentors look for correct calculations, concepts applied to a concrete decision rather than defined in the abstract and a reasoned conclusion. The course objective on economies of scale asks students to appraise their effect on the decision to add capacity, so showing average cost at more than one output and naming the source of any scale economy earns credit. Keeping within the 500 to 750 word range while still showing the arithmetic is part of the challenge. In this cost paper, the strongest answers explain why the van's fixed costs make volume so important and show the break-even number of visits per week, not only per year.

Common EIO 5200 Module 1 mistakes, and how to avoid them

Common slips are mixing fixed and variable costs, computing break-even with revenue instead of contribution per unit and assuming that a bigger operation is always cheaper per unit. List every cost and say which kind it is. Show average cost at several volumes. When you test added capacity, include the new fixed costs it brings and the demand it needs, then state the point where it starts to pay. Cite Besanko where you use a concept from the text. A free first sample of your own EIO-5200 Module 1 questions is available on request. State the van's capacity before you compute anything, since every later figure depends on it.

Write yours, or have the desk draft it

This paper is an original model document written by our desk, not a submitted student paper and not an official Thomas Edison State University document. Read it for the moves, then write your own to the instructions in your classroom. If you want one built to your exact prompt and rubric, the first custom sample is free and arrives in 24 to 48 hours.

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EIO 5200 Module 1 questions, answered

Where can I find a free EIO 5200 Module 1 sample paper?

The mobile veterinary practice paper above computes contribution, break-even and average cost and decides when a second van would pay.

How do you calculate break-even volume?

Fixed cost over (price less variable cost per visit).

What causes economies of scale?

Usually indivisible fixed costs spread over more output, plus purchasing discounts and specialization; they weaken when the main input grows in step with output.

What is minimum efficient scale?

The least output at which average cost bottoms out, past which size stops cutting unit cost.

How long are EIO-5200 written assignments?

Two to three pages, about 500 to 750 words, with APA citations for any outside sources.