Benefits received from “economies of scale” include: (Choose all that apply) a.

Question

Benefits received from “economies of scale” include: (Choose all that apply)
a. Price discounts due to volume purchases of materials and supplies Price discounts due to volume purchases of materials and supplies
b. Lower cost per unit produced Lower cost per unit produced
c. Decreasing cost per unit as the output level is reduced Decreasing cost per unit as the output level is reduced
d. The more you do something, the better you get at it

Which of the following are required for a capacity calculation (choose all that apply)
a. Time between process starts Time between process starts
b. Time between process completions Time between process completions
c. Total Time spent in the process Total Time spent in the process
d. Length of the time horizon in question

Explanation / Answer

1) a&b

Economies of scale means higher level of production. So, it helps to give price discounts by Supplier in purchase of materials and supplies. Also, due to higher production level, the per unit cost decreases. This is due to reduction in per unit fixed cost of component.

2) a, c

The time between process starts gives the duration for gap between two process which will result in capacity loss. Total time spent in the process gives the duration for which process continues. SO, both are critical to compute capacity

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