Why Would Economies of Scale Be a Barrier to Entry

question 298

Essay

Why would economies of scale be a barrier to entry?

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Definitions:

Finished Goods Inventory

Inventory that includes items that have been manufactured and are ready for sale but have not yet been sold.

Unadjusted Cost of Goods Sold

The initial calculation of all costs directly associated with the production of goods sold by a company, not including any adjustments for inventory methods or valuation changes.

Operations

The day-to-day activities involved in running a business that are necessary for producing goods and services and generating revenue.

Direct Labor-Hours

The total hours worked by employees directly involved in the production process, used as a basis for assigning labor costs to products.