When Lean Systems Are Implemented

question 6

Multiple Choice

When lean systems are implemented:

• A)Variable costs tend to increase,while fixed costs tend to decrease.
• B)Fixed costs tend to increase,while variable costs tend to decrease.
• C)Fixed and variable costs both tend to decrease.
• D)Contribution margin tends to decrease.

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Definitions:

Total Cost

The complete cost of production or providing a service, including fixed and variable costs.

Cycle Inventory

The average inventory a business maintains to satisfy its normal demand during a production or purchasing cycle.

Economies of Scale

Cost advantages obtained by businesses when production becomes efficient, leading to lower per-unit costs.

Profit

The financial gain, typically the difference between the amount earned from selling goods or services and the costs of producing them.