A Firm Increases Its Output and Its Average Total Costs

question 177

Essay

A firm increases its output and its average total costs remain unchanged.Is the firm experiencing increasing returns to scale,constant returns to scale,or decreasing returns to scale?

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Definitions:

Variable Overhead Efficiency Variance

A measure in cost accounting showing the difference between the actual variable overhead incurred and the expected (or standard) variable overhead based on the actual hours worked.

Variable Overhead Standards

Predetermined rates used to control and budget for the variable portion of manufacturing overhead costs, adjusting with production volumes.

Direct Labor-hours

The cumulative hours spent by workers who are primarily engaged in creating products or providing services.

Quantity Standard

A predetermined measure of the quantity of inputs expected to be used in the production of goods or services, used for budgeting and performance evaluation.