Baldwin’s Fashions is a small hosiery firm based in Manchester producing a range of ladies’ underwear. (For the purpose of our case study we assume it produces a single garment, a specifically designed pair of cotton briefs.) Although in previous years the business has consistently made a profit, it now finds that with current plant and market demand it is making a loss at all conceivable levels of output and ranges of price. Previous work studies have shown the workforce to be fully efficient and the capital used to be of the latest design, incorporating the most modern technology and fully appropriate to the current range of output. Figure 5.17 shows the total cost and total revenue curves associated with the above garment.