Economies of Scope Has to Do with Lowering Production Costs

question 208

True/False

Economies of scope has to do with lowering production costs by increasing the quantity of a product produced, whereas economies of scale has to do with lowering production costs by producing several products within the same firm.

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Definitions:

Office Equipment

Items and machinery used in an office for the purpose of carrying out business activities, like computers, printers, and furniture.

Depreciation

The systematic periodic transfer of the cost of a fixed asset to an expense account during its expected useful life.

Administrative Expense

Expenses related to the general operations of a business, such as salaries of non-sales personnel, rent, utilities, and office supplies.

Period Cost

Costs that are not directly tied to the production process and are expensed in the period in which they are incurred, such as selling, general, and administrative expenses.