Increasing Returns to Scale Occurs When a Firm's

question 65

Multiple Choice

Increasing returns to scale occurs when a firm's:

• A)average costs of production increase as its output increases.
• B)average costs of production decrease as its output increases.
• C)average fixed costs increase as its output increases.
• D)marginal costs increase as its output increases.

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Definitions:

Activity-based Costing

A costing methodology that assigns overhead and indirect costs to specific activities, helping to more accurately determine the cost of products or services.

Customer Margin

The profit margin attributed to a particular customer, calculated by subtracting the costs associated with serving that customer from the revenue generated.

Activity-based Costing

Activity-based costing is a more precise method of product costing that identifies activities in an organization and assigns the cost of each activity to all products and services according to the actual consumption.

Idle Capacity

The portion of a company's resources or production capability that is not currently being utilized to its full potential.