ABSTRACT
The difference between cost structure in the UK and the US can largely be explained by the huge difference in the scale of production. With a cost structure that greatly discourages price cuts, considerable increases in profits could be made by price rises. In a competitive industry in the short period, costs do not exert the decisive influence on prices that they do in the long run. The costs of bringing a new model into existence, and the special-purpose equipment required to produce it in large quantities. The precise mathematical result of the spreading of fixed overheads as volume rises or falls is distorted somewhat by reason of seasonal and other factors affecting actual costs. The more expensive, high-quality cars produced in relatively small volume often have large profit margins during a period of buoyant demand. The break-even point can be used to demonstrate how great the increase in volume must be to offset a given price cut.
