Lauren Owns a Bakery

question 141

Multiple Choice

Lauren owns a bakery. If she decided to expand the size of her bakery so that she could bake more bread, how would she know if she is experiencing constant returns to scale?

• A) Her long-run average cost of baking each loaf of bread remains unchanged.
• B) Her long-run total cost of baking bread decreases.
• C) Her long-run average cost of baking each loaf of bread decreases.
• D) Her long-run total cost of baking remains unchanged.
• E) Her long-run average cost of baking each loaf of bread increases.

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Definitions:

Operations

Tasks associated with the daily operations of a company aimed at generating value for stakeholders.

Absorption Costing

A cost accounting method that includes all manufacturing costs - direct materials, direct labor, and both variable and fixed overheads - in the cost of a unit of product.

Gross Margin

The difference between the revenue generated from sales and the cost of goods sold, representing the profit made before accounting for operating expenses.

Operations

Operations refer to the day-to-day activities involved in the running of a business for the purpose of producing value for the stakeholders.