If a Firm Experiences Lower Costs Per Unit as It

question 193

Multiple Choice

If a firm experiences lower costs per unit as it increases production in the long run, this is an example of:

• A) economies of scale.
• B) diseconomies of scale.
• C) increasing opportunity costs.
• D) scale reduction.

---

Definitions:

Direct Labor-Hours

The total hours worked by employees directly involved in the production process, used as a basis for allocating manufacturing overhead in cost accounting.

Variable Manufacturing Overhead

This refers to the expenses in manufacturing that vary in direct proportion to the volume of production, such as utilities and materials.

Standard Hours

The expected amount of time required to complete a task or produce a unit of product under normal conditions.

Variable Manufacturing Overhead

Expenses that vary with the level of production output, such as utilities and materials used in manufacturing.